Washington, D.C. 20549
MEDIACO HOLDING INC.
(I.R.S. Employer Identification No.)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o☐ No x☒
Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, as of June 30, 2022,2023, the last business day of the Registrant’s most recently completed second fiscal quarter, was $6,636,232.$23,670,214.
The number of shares outstanding of each of MediaCo Holding Inc.’s classes of common stock, as of March 24, 2023,April 19, 2024, was:
— 41,301,546
| Class A Common Shares, $.01 par value |
5,413,197
| Class B Common Shares, $.01 par value |
—
| Class C Common Shares, $.01 par value |
DOCUMENTS INCORPORATED BY REFERENCE
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Documents | Form 10-K Reference |
Proxy Statement for 2023 Annual Meeting of Shareholders expected to be filed by May 1, 2023 (the first business day following the day that is 120 days after the last day of the registrant’s 2022 fiscal year) | Part III |
None in this Amendment No. 1 on Form 10-K/A.
EXPLANATORY NOTE
Form 10-K in the Original Filing by reference to the Company’s definitive proxy statement for its 2024 annual meeting of shareholders. Because the Company does not anticipate filing its definitive proxy statement by April 29, 2024, the Company is filing this Amendment No. 1 (this “Amendment”) on Form 10-K/A, which amends and restates items identified below with respect to the Original Filing and provides the disclosure required by Part III of Form 10-K.MEDIACO HOLDING INC. AND SUBSIDIARIES
FORM 10-KThis Form 10-K/A only amends information in Part III, Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and Director Independence), Item 14 (Principal Accounting Fees and Services) and Part IV, Item 15 (Exhibits, Financial Statement Schedules). All other items as presented in the Original Filing are unchanged. Except for the foregoing amended and restated information, this Amendment does not amend, update or change any other information presented in the Original Filing.
TABLE OF CONTENTS
In addition, as required by Rule 12b-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Form 10-K/A contains new certifications by our principal executive officer and our principal financial and accounting officer, filed as exhibits hereto.
CERTAIN DEFINITIONS
Unless the context requires otherwise, all references in this report to “MediaCo,” “the Company,” “we,” “our,” “us,” and similar terms refer to MediaCo Holding Inc. and its consolidated subsidiaries.
FORWARD-LOOKING STATEMENTS
MEDIACO HOLDING INC. AND SUBSIDIARIES
AMENDMENT NO. 1 TO FORM 10-K
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| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Executive Officers
Information about executive officers of MediaCo or its affiliates who are not directors or nominees to be directors, other than Brian Kei, who was appointed the Company’s Chief Operating Officer on April 17, 2024, is presented in Part I of the Original Filing under the caption “Information about our Executive Officers.”
Mr. Kei, age 46, was previously the Chief Operating Officer and Chief Financial Officer for Estrella Media, Inc. Prior to joining Estrella Media, Inc., he led finance and strategy as the Vice President of Finance for ABC Television, a division of the Walt Disney Company. Mr. Kei holds an AB in Economics from Princeton University.
Directors
Information about our directors is as follows.
Under the terms of the Company’s Amended and Restated Articles of Incorporation, Messrs. Enright, Smulyan and Walsh were nominated as Class A Directors based upon the recommendation of Emmis Operating Company (“EOC”). EOC, a wholly owned subsidiary of Emmis Communications (“Emmis”), is entitled to nominate each of the three Class A Directors so long as either that certain Management Agreement, dated November 25, 2019, between MediaCo and EOC (the “Management Agreement”) remains in effect, or that certain Unsecured Promissory Note, dated November 25, 2019, from MediaCo to Emmis Communications Corporation (the “Emmis Promissory Note”) remains outstanding. While the Management Agreement terminated in November 2021, the Emmis Promissory Note currently remains outstanding.
On April 17, 2024, MediaCo consummated the transactions contemplated by that certain asset purchase agreement, dated April 17, 2024 (the “Asset Purchase Agreement”) with Estrella Broadcasting, Inc., a Delaware corporation (“Estrella”), and SLF LBI Aggregator, LLC, a Delaware limited liability company (“Aggregator”) and affiliate of HPS Investment Partners, LLC (“HPS”), pursuant to which MediaCo, through a wholly-owned subsidiary, MediaCo Operations LLC (“Purchaser”), purchased substantially all of the assets of Estrella and its subsidiaries (other than certain broadcast assets owned by Estrella and its subsidiaries, and assumed substantially all of the liabilities of Estrella and its subsidiaries. In connection with such transactions, MediaCo entered into a stockholders’ agreement with SG Broadcasting and Aggregator (the “Stockholders Agreement”) that, among other things, provides Aggregator the right to designate up to three individuals for election to the Board (each such designee, an “Investor Director Designee”), subject to reduction and termination based on certain MediaCo stock ownership requirements (including that such designation right falls away upon Aggregator ceasing to beneficially own at least ten percent (10%) of the fully diluted MediaCo common stock for ten consecutive days). Ms. Hernandez, and Messrs. Cannon and Pertuz, were designated by Aggregator pursuant to such rights and elected to the board effective April 17, 2024.
The board believes that well-functioning boards consist of a diverse collection of individuals that bring a variety of complementary skills. Although the board of directors does not have a formal policy with regard to the consideration of diversity in identifying directors, diversity is one of the factors that the board may, pursuant to its charter, take into account in identifying director candidates. Subject to any contractual commitments, the board generally considers each director eligible for nomination in the broad context of the overall composition of our board of directors with a view toward constituting a board that, as a body, possesses the appropriate mix of skills and experience to oversee our business. The board of directors may actively seek candidates that embody elements of diversity in skills, ability, industry knowledge, experience, gender, race and ethnicity. The experience, qualifications, attributes, or skills that led the board to conclude that each of the members of the board of directors should serve on the board are generally described below.
Name, Age, Principal Occupation(s) and Business Experience of Our Directors
Terms expiring in 2024:
Andrew P. Glaze, Age 45 – Class B Director (Director since November 2019)
Andrew Glaze is the founder and has served as the Chief Investment Officer of Shiro Capital since 2019. Prior to Shiro Capital, Mr. Glaze served as a Research Analyst at Standard General L.P. (“Standard General”) from 2016 to June 2019. Before joining Standard General, Mr. Glaze was a Managing Director at Claar Advisors, LLC, which he joined in 2014. Mr. Glaze was the founder, and, from 2009 through 2014, the Chief Investment Officer of Emys Capital, LLC. Prior to May 2009 he was an investment banking associate on the Consumer and Leveraged Finance teams at Merrill Lynch. Mr. Glaze began his career in the United States Army where he served as an officer for five years in the 1st Cavalry Division. As part of his service, Mr. Glaze deployed to Baghdad, Iraq for one year where he served with distinction as a Captain and Aviation Brigade Fire Support Officer. Mr. Glaze is a service-disabled veteran. He holds a B.S. from the United States Military Academy at West Point and an MBA from Columbia Business School, where he participated in the highly selective Value Investing Program. Mr. Glaze is a Chartered Financial Analyst.
Mr. Glaze is an experienced investment professional, with substantial expertise in making and supervising investments at all levels of the capital structure. His investment banking experience and investment experience allows Mr. Glaze to provide valuable insights to the board on capital structure and prospective acquisition opportunities.
Brett Pertuz, Age 50 – (Director since April 2024)
Brett Pertuz is a Managing Director at HPS. Prior to joining HPS in 2018, Mr. Pertuz worked in private equity as a Managing Director first with Bruckmann, Rosser, Sherrill & Co. and later with Altpoint Capital Partners. Mr. Pertuz began his career at Bain & Company in management consulting. Mr. Pertuz holds a BS from the University of Virginia and an MBA from Harvard Business School.
Mr. Pertuz was designated by Aggregator pursuant to the Stockholders Agreement and as such elected to the Board effective April 17, 2024. Mr. Pertuz brings to the board substantial experience in the financial industry and in private equity and finance transactions. He has served on the boards of several private companies in a variety of industries.
Patrick M. Walsh, Age 56 – Class A Director (Director since November 2019)
Patrick Walsh was appointed our President and Chief Operating Officer in June 2019 and relinquished the title of Chief Operating Officer in August of 2020 and the title of President in June of 2021. Mr. Walsh also serves as President, Chief Operating Officer and a director of Emmis, positions he has held since August 2015. Previously, he was Executive Vice President, Chief Financial Officer and Chief Operating Officer of Emmis, having joined Emmis in September 2006. With Emmis’ launch of a special purpose acquisition corporation in January 2021, Mr. Walsh was also appointed President, Chief Operating Officer and a director of Monument Circle Acquisition Corp. Mr. Walsh joined Emmis from iBiquity Digital Corporation (now Xperi Corporation), the developer and licensor of HD Radio technology, where he served as Chief Financial Officer from 2002 to 2006. Mr. Walsh previously served as a management consultant for McKinsey & Company, and worked in various sales, marketing, finance and accounting roles at General Motors and Deloitte. Mr. Walsh also serves as a director of video game ad tech company Anzu Virtual Reality and Center for Leadership Development. He recently completed serving on the Alumni Board of Governors at the Ross School of Business Administration at the University of Michigan, serving as Vice Chairman and Director of National Association of Broadcasters, and a director at Radio Music License Committee and Radio Advertising Bureau. Mr. Walsh has a BBA from the University of Michigan and an MBA from Harvard Business School. Mr. Walsh is a Certified Public Accountant.
Mr. Walsh was recommended by EOC and, as such, pursuant to MediaCo’s Amended and Restated Articles of Incorporation, our board is currently required to nominate him as a Class A Director. In addition to his background in finance and radio, television, and digital media operations, Mr. Walsh has experience as a management consultant and has served in financial and operational capacities in a business that sold technology to the radio industry.
Terms expiring in 2025:
Colbert Cannon, Age 48 – (Director since April 2024)
Colbert Cannon is a Managing Director at HPS. Prior to joining HPS in 2017, Mr. Cannon was a Partner and Director of Research at Wingspan Investment Management, a distressed credit investment firm launched in 2013. Prior to Wingspan, Mr. Cannon was a Managing Director at Glenview Capital, where he led the Credit Investment effort from 2009 to 2012. Prior to joining Glenview, Mr. Cannon was a Principal at Audax Group, a Boston-based Private Equity firm. Mr. Cannon began his career in Mergers and Acquisitions Investment Banking at Goldman Sachs. Mr. Cannon holds an AB in Social Studies from Harvard College.
Mr. Cannon was designated by Aggregator pursuant to the Stockholders Agreement and as such elected to the Board effective April 17, 2024. Mr. Cannon brings to the board an extensive background in financial analysis, operational oversight, and has served on the board of several media companies.
Robert L. Greene, Age 56 – Class B Director (Director since January 2023)
Robert Greene has been the President and Chief Executive Officer of the National Association of Investment Companies, the industry trade association and largest network of diverse-owned alternative asset class investment firms, since February 2013. He was the Head of Investor Relations of Syndicated Communications Venture Partners, a venture capital firm, from June 2007 to December 2013. Mr. Greene currently serves on the board of directors of the Boy Scouts of America National Executive Board, the board of directors of Transworld Systems Inc., a privately held, private equity-backed company that provides debt collection services for Fortune 500 companies on a global basis, and the board of directors of Synergy Infrastructure Holdings, a privately held, private equity-backed company that is a leading provider of compact, heavy and pump equipment rentals. Previously, he also served on the board of directors and audit committee of Starboard Value Acquisition Corporation, a blank check company, which in July 2021 merged with Cyxtera Technologies, Inc. (Nasdaq: CYXT), a global leader in colocation and interconnection services.
Mr. Greene’s broad level of investment and board experience provides MediaCo with a diversified view into best practices across the operations, accounting, systems and fund raising.
Deborah A. McDermott, Age 69 – Class B Director (Director since November 2019)
Deb McDermott serves as CEO of Standard Media Group LLC. She has a 25-plus year career leading broadcast groups- including COO of Media General and CEO-President of Young Broadcasting. As CEO, she spearheaded Young’s successful mergers with Media General and LIN Media. Ultimately, overseeing the combined company’s more than 70 television stations. . Deb currently serves as Chair of the Board of Directors of MediaCo Holding Inc.
Among her many accomplishments, Ms. McDermott was inducted into the Broadcasting & Cable Hall of Fame in 2013 and the Library of American Broadcasting Foundation’s Giants of Broadcasting and Electronics Arts award in 2022. She currently serves on the ABC Board of Governors, the Board of Directors for Television Bureau of Advertising, National Association of Broadcasters and the International Radio and Television Society. She is also a member of C200 and CEO.org. Previously, Ms. McDermott served on the Board of Directors for the Country Music Association and Chair of the National Association of Television Program Executives (NATPE).
Jeffrey H. Smulyan, Age 77 – Class A Director (Director since June 2019)
Jeff Smulyan founded Emmis in 1979 and serves as its Chairman of the board of directors and Chief Executive Officer. At Emmis, he has held the positions of Chairman of the board of directors and Chief Executive Officer since 1981 and was President until August 2015. Mr. Smulyan was also appointed Chairman of the board of directors and Chief Executive Officer of Monument Circle Acquisition Corp., a special purpose acquisition corporation, from January 2021 through December 2023. Mr. Smulyan began working in radio in 1973 and has owned one or more radio stations since then. Formerly, he served as our Chief Executive Officer from June 2019 through June 2021, and he was also the owner and chief executive officer of the Seattle Mariners Major League Baseball team. He is former Chairman of the Radio Advertising Bureau; a former director of The Finish Line, a sports apparel manufacturer; and serves as a Trustee of his alma mater, the University of Southern California. Among other awards, Mr. Smulyan has received the National Radio Award, been inducted into the Broadcasting and Cable Hall of Fame, been named a “Giant of Broadcasting” by the Library of American Broadcasting and been honored as an Indiana Living Legend.
Mr. Smulyan was recommended by EOC, and, as such, pursuant to MediaCo’s Amended and Restated Articles of Incorporation, our board is currently required to nominate him as a Class A Director. Mr. Smulyan’s experience ranges from running an individual radio station to chairing significant broadcast industry groups, providing the board with strategic insights into the broadcast industry and future trends that will likely affect the company’s radio broadcasting operations.
Terms expiring in 2026:
J. Scott Enright, Age 61 – Class A Director (Director since November 2019)
Scott Enright serves as Executive Vice President, General Counsel and Secretary of Emmis, a position he has held since March 2009. He also served as Executive Vice President, General Counsel and Secretary of Monument Circle Acquisition Corp., a special purpose acquisition corporation, from January 2021 through December 2023, and as Executive Vice President, General Counsel and Secretary of MediaCo from June 2019 through November 25, 2021. Mr. Enright joined Emmis in October 1998, previously being a partner at the law firm Bose McKinney & Evans. He serves on the board of Broadcaster Traffic Consortium, LLC (an aggregator of radio broadcast spectrum used to distribute traffic data to in-dash and handheld mapping devices), as well as on the boards of charitable organizations such as Goodwill of Central and Southern Indiana, Inc., EdChoice, Inc. (formerly the Milton and Rose D. Friedman Foundation) and the Endowment of the Second Presbyterian Church of Indianapolis.
Mr. Enright was recommended by EOC and, as such, pursuant to MediaCo’s Amended and Restated Articles of Incorporation, our board is currently required to nominate him as a Class A Director. Mr. Enright is a lawyer with extensive experience in a wide range of legal issues facing publicly traded media companies, including corporate governance and regulatory matters.
Jacqueline Hernández, Age 58 – (Director since April 2024)
Jacqueline Hernández was appointed as MediaCo’s Interim Chief Executive Officer effective April 17, 2024, and also joined the Board at such time. Ms. Hernández is a media executive who most recently was Founder and CEO of New Majority Ready, a marketing strategy and content development firm. Prior to starting her own company, she was President of Combate Americas, a leading Hispanic sports franchise. Prior to Combate Americas, Ms. Hernández was Chief Marketing Officer of NBC Universal Hispanic Enterprises and Content and Chief Operation Officer of NBC Universal’s Telemundo Enterprises. Prior to joining NBC Universal, Ms. Hernández was Publisher of People en Español and TEEN People. Prior to joining People en Español, she was Vice President Turner International Advertising. Prior to Turner, Ms. Hernández was Director of Marketing of TIME International. Prior to TIME, Ms. Hernández was Director of Targeted Advertising Sales for the Village Voice. Ms. Hernández began her career in advertising at the Boston Globe. Ms. Hernández currently sits on the board of Victoria’s Secret & Co., and previously served on the board of Estrella Media, Inc. She holds a BA from Tufts University and an MBA from Baruch College.
Ms. Hernandez was designated by Aggregator pursuant to the Stockholders Agreement and as such elected to the Board effective April 17, 2024. Ms. Hernandez brings business expertise in transforming business models for growth as well as a rich cultural fluency in understanding and connecting with multicultural consumers.
Mary Beth McAdaragh, Age 60 – Class B Director (Director since November 2019)
Mary Beth McAdaragh has over 30 years of media production, distribution and marketing experience having been involved with the branding and marketing of some of the most recognizable television franchises in domestic and international syndication. She most recently served as Executive Vice President, Marketing/Affiliate Relations for CBS Media Ventures (a division of ViacomCBS). She was responsible for the Marketing and Affiliate Relations for the industry’s leading roster of first-run and off-network syndicated product including: Judge Judy, Dr. Phil, Wheel of Fortune, Jeopardy!, Entertainment Tonight, The Drew Barrymore Show, Rachael Ray and Inside Edition. In 2000, she was named Vice President, Marketing for NBC Enterprises, the then newly formed syndication division of NBC. There she developed domestic and international marketing campaigns for The Weakest Link, Fear Factor, and Access Hollywood. In 2006, upon the inception of 20th Century Fox’s new broadcast network, MyNetworkTV, McAdaragh produced a six-week, 30 city marketing and promotional tour across the United States to launch the new venture. She was then named Senior Vice President of Affiliate Relations where she was the key liaison between the Network and their 180+ broadcast station affiliates around the country. Ms. McAdaragh created and executive produced The Surreal Gourmet, a traveling cooking show which aired for five seasons on Food Network, and she has served as a business development and marketing consultant for both traditional media and new technology ventures.
Ms. McAdaragh graduated from South Dakota State University with a BA in Broadcast Journalism and is a member of the university’s Mass Communications Department Advisory Council. She is the recipient of numerous creative awards including two Daytime Emmy® Awards and PROMAX Gold Medallions. She is active in many trade and civic organizations and resides in Beverly Hills, California.
Amit Thakrar, Age 36 (Director since August 2023)
Amit Thakrar has over 15 years of experience investing in private equity, public equity and special situations strategies across a broad range of industries including most recently as a Partner at Standard General LP beginning in 2019. Between 2010 and 2019, he worked at Davidson Kempner Capital Management, OMERS Private Equity, and CIBC World Markets. In addition, he has extensive operating experience, including serving as Executive Vice President of Standard Media Group LLC, a diversified national media company.
Mr. Thakrar received his MBA from Columbia Business School and a Bachelor of Commerce (Honors) from Queen's University. Mr. Thakrar brings to the Board a strong investment, financial management and operational background in the media space.
Corporate Governance
General
MediaCo aspires to the highest ethical standards for our employees, officers and directors, and remains committed to the interests of our shareholders and other constituents. We believe we can achieve these objectives only with a plan for corporate governance that clearly defines responsibilities, sets high standards of conduct and promotes compliance with the law. The board of directors has adopted formal corporate governance guidelines, as well as policies and procedures designed to foster the appropriate level of corporate governance. Some of these guidelines and procedures are discussed below. For further information, including electronic versions of our Code of Business Conduct and Ethics, our Corporate Governance Guidelines, our Audit Committee Charter, our Compensation Committee Charter, and our Complaint Procedure for Accounting and Auditing Matters, please visit the Corporate Governance section of our website (www.MediaCoHolding.com) located under the “Company Info” heading.
Board Diversity
Pursuant to the Nasdaq’s Board Diversity Rules, below is the Board Diversity Matrix outlining diversity statistics regarding our Board. In addition to gender and demographic diversity, we also recognize the value of other diverse attributes that directors may bring to our Board, including veterans of the U.S. Military. We are proud to report includesthat of our eight current directors, one is also a military veteran.
Board Diversity Matrix (as of April 19 2024)
| | | Female | | | Male | |
| Total Number of Directors | | | 3 | | | | 8 | |
| Part I: Gender Identity | | | | | | | | |
| Directors | | | 3 | | | | 8 | |
| Part II: Demographic Background | | | | | | | | |
| African American or Black | | | — | | | | 2 | |
| Alaskan Native or Native American | | | — | | | | — | |
| Asian | | | — | | | | 1 | |
| Hispanic or Latinx | | | 1 | | | | 1 | |
| Native Hawaiian or Pacific Islander | | | — | | | | — | |
| White | | | 2 | | | | 3 | |
| Two or More Races or Ethnicities | | | — | | | | 1 | |
| LGBTQ+ | | | — | | | | — | |
| Did Not Disclose Demographic Background | | | — | | | | — | |
Code of Ethics
MediaCo has adopted a Code of Business Conduct and Ethics to document the ethical principles and conduct we expect from our employees, officers and directors. A copy of our Code of Business Conduct and Ethics is available in the Corporate Governance section of our website (www.MediaCoHolding.com) located under the “Company Info” heading.
Leadership Structure and Risk Oversight
MediaCo’s Corporate Governance Guidelines provide that the chair of the board is to meet the independence requirements under the applicable Nasdaq listing standards. Our board has determined that our board chair, Deborah McDermott, is an “independent director” under Nasdaq rules. As Chair, Ms. McDermott is responsible for, among other matters: (i) setting the agenda for and leading executive sessions of the independent directors, unless a lead director is otherwise appointed by the Chair; (ii) briefing the CEO on issues arising in the executive sessions; (iii) coordinating and developing the agenda for meetings of the board, in collaboration with the CEO; (iv) convening meetings of the independent directors as necessary or incorporates forward-looking statementsappropriate; and (v) if requested and appropriate, being available for consultation with major shareholders. The board believes that this structure provides strong independent leadership and oversight for our Company and our board.
The board of directors expects the Company’s management to take primary responsibility for identifying material risks the company faces and communicating them to the board, developing and implementing appropriate risk management strategies responsive to those risks with oversight from the board, and integrating risk management into the Company’s decision-making processes. The board, through the Audit Committee on a quarterly basis and as a full board at least annually, regularly reviews information regarding the company’s credit, liquidity and operational risks, as well as strategies for addressing and managing such risks. In addition, the Compensation Committee monitors the Company’s compensation programs so that such programs do not encourage excessive risk-taking by Company employees.
Communications with Independent Directors
Any employee, officer, shareholder or other interested party who has an interest in communicating with the Chair or any other MediaCo independent directors regarding any matter may do so by directing communication to Ms. McDermott addressed to Board Chair, c/o Corporate Secretary, MediaCo Holding Inc., 48 W. 25th Street, Floor 3, New York, New York 10010, by e-mail message to Chair@MediaCoHolding.com. The communication will be delivered to the independent directors as appropriate. For matters related to finance or auditing, a communication should specify that it is directed to the Audit Committee. For matters related to compensation, a communication should specify that it is directed to the Compensation Committee. Messages for any director or the board of directors as a whole may be delivered through the Board Chair as well.
Consideration of Candidates for Nomination as Director
The board of directors will consider and evaluate potential nominees submitted by holders of our Class A Shares to our corporate secretary on or before the date for shareholder nominations specified in the “Shareholder Proposals” section of the Company’s proxy statement. These potential nominees will be considered and evaluated using the same criteria as potential nominees obtained by the board of directors from other sources, subject to the requirement to only nominate persons recommended by EOC so long as the Emmis Promissory Note is outstanding and to Aggregator’s rights to designate up to three individuals for election to the Board in accordance with the terms of the Stockholders Agreement.
In its assessment of each potential candidate, including those recommended by shareholders, the board of directors takes into account all factors it considers appropriate, which may include (a) ensuring that the board of directors, as a whole, is diverse and consists of individuals with various and relevant career experience, relevant technical skills, industry knowledge and experience, financial expertise (including expertise that could qualify a director as an “audit committee financial expert,” as that term is defined by the rules of the SEC), local or community ties, (b) minimum individual qualifications, including strength of character, mature judgment, familiarity with our business and related industries, independence of thought and an ability to work collegially, and (c) contractual and other obligations to nominate individuals recommended by EOC or SG Broadcasting. The board also may consider the extent to which the candidate would fill a present need on the board of directors. After conducting an initial evaluation of a candidate, the board of directors would be expected to interview that candidate if it believes the candidate might be suitable to be a director and may ask the candidate to meet with certain directors and management. If the board believes a candidate would be a valuable addition to the board of directors, it would expect to nominate that candidate as a director.
Certain Committees of the Board of Directors
The standing committees of our board of directors are the Audit Committee and the Compensation Committee. MediaCo is a “controlled company” within the meaning of the Nasdaq listing standards. As such, we are exempt from Nasdaq’s requirement that director nominees be selected exclusively by independent directors constituting a majority of the independent directors of the board of directors or that MediaCo have a nominations committee comprised solely of independent directors. Accordingly, MediaCo does not have a separate standing nomination and corporate governance committee comprised of independent directors. The responsibilities and functions normally associated with such committee are instead carried out by the full board of directors.
Audit Committee. The Audit Committee’s primary responsibility is to engage our independent auditors and otherwise to monitor and oversee the audit process. The Audit Committee also undertakes other related responsibilities as summarized in the Report of the Audit Committee below and detailed in the Audit Committee Charter, which is available in the Corporate Governance section of our website (www.MediaCoHolding.com) located under the “Company Info” heading. The board of directors has determined that the members of the Audit Committee, Robert L. Greene (chair), Deborah McDermott and Mary Beth McAdaragh, are independent directors under the Exchange Act and the Nasdaq listing standards. The Audit Committee held four meetings during the last fiscal year.
Compensation Committee. The Compensation Committee reviews our compensation and benefit plans for executive officers to ensure that our corporate objectives are met, establishes compensation arrangements and approves compensation payments to members of our board of directors and our executive officers, and generally administers our equity incentive plans. The Compensation Committee’s charter is available in the Corporate Governance section of our website (www.MediaCoHolding.com) located under the “Company Info” heading. The members of the Compensation Committee are Deborah McDermott (chair) and Mary Beth McAdaragh, all of whom are independent directors under Nasdaq listing standards. The Compensation Committee held three meetings during the last fiscal year.
Additional Committees. The Company also has a Diversity, Equity and Inclusion Committee, the sole member of which is Andrew Glaze, who is an independent director under Nasdaq listing standards.
Meeting Attendance
In 2023, our board of directors held four meetings, either in person or by telephone. Each director attended at least 75% of the aggregate of (1) the total number of meetings of our board of directors held while he or she was a director and (2) the total number of meetings held by all committees on which he or she served during the periods that he or she served on the committee.
We believe that communication between our shareholders and the members of our board of directors is enhanced by the opportunity for personal interaction at our annual meeting of shareholders. Accordingly, we encourage the members of our board of directors to attend our annual meeting of shareholders whenever possible. All but one of our directors attended the Company’s annual meeting of shareholders in 2023, which was held in a virtual-only format.
Compensation of Directors
During 2021, the Compensation Committee authorized annual retainers of $75,000 for each director who is not an officer of Emmis, as well as the following retainers for certain committee chairs: $50,000 for Board Chair, $50,000 for Audit Committee Chair, $50,000 for Acquisition Committee Chair, $50,000 for Digital Committee Chair, $50,000 for COVID Committee Chair, and $100,000 for Diversity Committee Chair. However, these amounts remained subject to the previous decision by the directors, made in the summer of 2020, that each of the directors would reduce their annual $75,000 retainers by twenty percent, with Ms. McDermott reducing her retainer by forty percent. This reduction has remained in effect since that time and remains in effect for 2024, except that for 2024, the amount of the reduction is expected to be paid in Class A Shares. Ms. Hernandez receives no additional compensation for her service on the Board. Additionally, Mr. Cannon and Mr. Pertuz receive no compensation for their services on the Board.
| Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) | | | Option Awards ($) | | | All Other Compensation ($) | | | Total ($) | |
| J. Scott Enright | | | — | | | | — | | | | — | | | | — | | | | — | |
| Andrew P. Glaze | | | 85,000 | | | | 15,000 | | | | — | | | | — | | | $ | 100,000 | |
| Robert L. Greene | | | 110,000 | | | | 15,000 | | | | — | | | | — | | | $ | 125,000 | |
| Mary Beth McAdaragh | | | 60,000 | | | | 15,000 | | | | — | | | | — | | | $ | 75,000 | |
| Deborah A. McDermott | | | 95,000 | | | | 30,000 | | | | — | | | | — | | | $ | 125,000 | |
| Jeffrey H. Smulyan | | | — | | | | — | | | | — | | | | — | | | | — | |
| Patrick M. Walsh | | | — | | | | — | | | | — | | | | — | | | | — | |
| Amit Thakrar | | | 23,571 | | | | 15,000 | | | | — | | | | — | | | $ | 38,571 | |
Delinquent Section 27A16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers and any beneficial owner of more than 10% of any class of our equity securities to file with the SEC initial reports of beneficial ownership and reports of changes in ownership of any of our securities. These reports are made on documents referred to as Forms 3, 4 and 5. Our directors and executive officers must also provide us with copies of these reports. We have reviewed the copies of the reports that we have received and any written representations that no Form 5 was required from the individuals required to file the reports that we have received, as well as reviewed Forms 3, 4 and 5 filed with the SEC. Based on this review, we believe that during the year ended December 31, 2023, each of our directors and executive officers and beneficial owners of more than 10% of any class of our equity securities timely complied with applicable reporting requirements for transactions in our equity securities, except (i) Mr. Lindsay was late in filing Form 4s in connection with two withholdings of shares in order to pay taxes associated with the grant of shares or vesting of restricted shares, (ii) Ms. Beemish was late in filing Form 4s in connection with two withholdings of shares in order to pay taxes associated with the grant of shares or vesting of restricted shares and one grant of shares as employment compensation, (iii) Mr. Tobin was late in filing Form 4s in connection with one withholding of shares in order to pay taxes associated with the grant of shares or vesting of restricted shares and one grant of shares as employment compensation, (iv) Emmis Corporation was late in filing one Form 4 in connection with the sale of 300 shares of the Class A common stock, (v) Mr. Sogadzi and Mr. Thakrar were late in filing their Form 3s in connection with their service as an executive officer and a Board member, respectively, and (vi) each of Mss. McDermott and Riggio, and Messrs. Greene and Glaze, was late in filing a Form 4 in connection with a grant of shares as compensation for service on the Board in August 2023.
| ITEM 11. | EXECUTIVE COMPENSATION |
We were managed by our four named executive officers for 2023, Rahsan-Rahsan Lindsay, who served as our Chief Executive Officer through October 11, 2023, Ann C. Beemish, our Chief Financial Officer, Bradford A. Tobin, who served as our President and Chief Operating Officer through July 11, 2023, and Kudjo Sogadzi, who became our Chief Operating Officer on July 11, 2023 and who served as our Interim President (and thus our principal executive officer) from October 11, 2023 to April 17, 2024. The following table sets forth the compensation awarded to, earned by, or paid to Mr. Lindsay, Ms. Beemish, Mr. Tobin and Mr. Sogadzi, as approved by the Compensation Committee of our Board, which has responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy. The Compensation Committee seeks to ensure that the total compensation paid to the executives is fair, reasonable and competitive.
2023 SUMMARY COMPENSATION TABLE
| Name and Principal Position | | Year | | Salary ($) | | | Bonus ($) | | | Stock Awards ($) - Assumes Vested | | | Option Awards ($) | | | All Other Compensation ($) (1) | | | Total ($) | |
| Rahsan-Rahsan Lindsay | | 2023 | | | 440,000 | | | | — | | | | 52,571 | | | | — | | | | 186,440 | | | | 679,011 | |
| Chief Executive Officer | | 2022 | | | 550,528 | | | | — | | | | 565,132 | | | | — | | | | — | | | | 1,115,660 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bradford A. Tobin | | 2023 | | | 222,388 | | | | — | | | | 142,205 | | | | — | | | | 274,950 | | | | 639,192 | |
| President and Chief Operating Officer | | 2022 | | | 350,528 | | | | — | | | | 426,056 | | | | — | | | | — | | | | 776,584 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ann C. Beemish | | 2023 | | | 300,000 | | | | 150,000 | | | | 178,610 | | | | — | | | | 528 | | | | 628,610 | |
| Chief Financial Officer & Treasurer | | 2022 | | | 300,528 | | | | — | | | | 276,882 | | | | — | | | | — | | | | 577,410 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Kudjo Sogadzi | | 2023 | | | 92,308 | | | | — | | | | — | | | | — | | | | 176 | | | | 92,308 | |
| Chief Operating Officer | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | These amounts represent: |
for Mr. Lindsay in 2023, $119,516 in payments made upon his separation from the Company, $66,484 in consulting fees paid during 2023, and $440 for payments of premiums on long-term disability insurance.
for Mr. Tobin in 2023, $175,000 in payments made upon his separation from the Company, $57,750 in consulting fees paid during 2023, $23,547 paid with respect to COBRA premiums, $18,301 in payments for accrued and unused paid time off and $440 for payments of premiums on long-term disability insurance.
for Ms. Beemish and Mr. Sogadzi, $528 and $176, respectively, for payments of premiums on long-term disability insurance
OUTSTANDING EQUITY AWARDS AT YEAR-END 2023
| | | Option Awards | | | Stock Awards | |
| | | Number of Securities Underlying Unexercised Options (#) | | | Number of Securities Underlying Unexercised Options (#) | | | Option Exercise Prce ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Note Vested (1) ($) | |
| Name | | Exercisable | | | Unexercisable | |
| Rahsan-Rahsan Lindsay | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Bradford A. Tobin | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Ann C. Beemish | | | — | | | | — | | | | — | | | | — | | | | 28,232 | | | | 12,126 | |
| Kudjo Sogadzi | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
(1) These values were calculated using the $0.4295 closing price of our Class A Shares on December 31, 2023.
Retirement Plan
The Company sponsors a Section 401(k) retirement savings plan that is available to substantially all employees 18 years of age and older who have at least 30 days of service. Employees may make pre-tax contributions to the plan of up to the annual limit prescribed by the Internal Revenue Service (“IRS”). The Company may make discretionary matching contributions to the plans in the form of cash. Employee contributions are matched at 100% up to a maximum of 2% of eligible compensation.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
As of April 19, 2024, there were 41,301,546 Class A Shares and 5,413,197 Class B Shares issued and outstanding. The Class A Shares are entitled to an aggregate of 41,301,546 votes and the Class B Shares are entitled to an aggregate of 54,131,970 votes. The following table shows, as of April 19, 2024, the number of shares and percentage of our Class A Shares and Class B Shares held by each person known to us to own beneficially more than five percent of the issued and outstanding Class A Shares or Class B Shares, by our named executive officers and our directors, and by our named executive officers and directors as a group. Unless otherwise specified, the address of each person listed is: c/o MediaCo Holding Inc., 48 W. 25th Street, Floor 3, New York, NY 10010.
| | | Class A Shares | | | Class B Shares | | | | | | | |
Five Percent Shareholders, Directors, Nominees and Certain Executive Officers | | Amount and Nature of Beneficial Ownership Class A Shares (1) (2) | | | Percent of Class | | | Amount and Nature of Beneficial Ownership Class B Shares (1) | | | Percent of Class | | | Total Beneficial Ownership of Outstanding MediaCo Interests (2) | | | Percent of Total Voting Power of Outstanding MediaCo Interests | |
| Standard General, L.P. | | | 42,945,193 | | | | 91.93 | % | | | 5,413,197 | | | | 100.00 | % | | | 42,945,193 | | | | 96.05 | % |
| Andrew P. Glaze | | | 73,023 | | | | 0.18 | % | | | — | | | | — | % | | | 73,023 | | | | * | |
| Mary Beth McAdaragh | | | 34,342 | | | | 0.08 | % | | | — | | | | — | % | | | 34,342 | | | | * | |
| Deborah A. McDermott | | | 40,453 | | | | 0.10 | % | | | — | | | | — | % | | | 40,453 | | | | * | |
| Jeffrey H. Smulyan | | | — | | | | — | % | | | — | | | | — | % | | | — | | | | * | |
| Patrick M. Walsh | | | — | | | | — | % | | | — | | | | — | % | | | — | | | | * | |
| Ann C. Beemish | | | 123,811 | | | | 0.30 | % | | | — | | | | — | % | | | 123,811 | | | | * | |
| Robert L. Greene | | | 20,849 | | | | 0.05 | % | | | — | | | | — | % | | | 20,849 | | | | * | |
| Amit Thakrar | | | 12,856 | | | | 0.03 | % | | | — | | | | — | % | | | 12,856 | | | | * | |
| Kudjo Sogadzi | | | — | | | | — | % | | | — | | | | — | % | | | — | | | | * | |
| J. Scott Enright | | | — | | | | — | % | | | — | | | | — | % | | | — | | | | * | |
| Rahsan-Rahsan Lindsay | | | 10,117 | | | | 0.02 | % | | | — | | | | — | % | | | 10,117 | | | | * | |
| Bradford A. Tobin | | | — | | | | — | % | | | — | | | | — | % | | | — | | | | * | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| All Named Executive Officers and Directors as a Group (12 persons) | | | 315,451 | | | | 0.76 | % | | | — | | | | — | % | | | 315,451 | | | | 0.33 | % |
| Other 5% Shareholders: | | | | | | | | | | | | | | | | | | | | | | | | |
| Emmis Communications Corporation | | | 4,332,394 | | | | 9.57 | % | | | — | | | | — | % | | | 4,332,394 | | | | 4.36 | % |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
Independent Directors
Our board of directors currently consists of 11 members. Of these, our board has determined that five (Mses. McAdaragh and McDermott, and Messrs. Glaze, Greene and Thakrar) qualify as “independent directors” under the listing standards of The Nasdaq Stock Market, Inc. (“Nasdaq”). In addition, MediaCo is a “Controlled Company” as defined in the Nasdaq listing standards. The company is, therefore, pursuant to Nasdaq Marketplace Rule 5615(c)(2), exempt from certain aspects of Nasdaq’s listing standards relating to independent directors.
Transactions With Related Persons
Transaction with Estrella
Asset Purchase Agreement
On April 17, 2024, MediaCo and its wholly-owned subsidiary MediaCo Operations LLC (“Purchaser”), entered into the Asset Purchase Agreement, pursuant to which Purchaser purchased substantially all of the assets of Estrella and its subsidiaries (other than certain broadcast assets owned by Estrella and its subsidiaries (the “Estrella Broadcast Assets”)) (the “Purchased Assets”), and assumed substantially all of the liabilities (the “Assumed Liabilities”) of Estrella and its subsidiaries.
MediaCo provided the following consideration for the Purchased Assets:
i.A warrant (the “Warrant”) to purchase up to 28,206,152 shares of MediaCo’s Class A Common Stock, par value $0.01 per share (“Class A Common Stock”);
ii.60,000 shares of a newly designated series of MediaCo’s preferred stock designated as “Series B Preferred Stock” (the “Series B Preferred Stock”), the terms of which are described in Item 3.03 of this Current Report on Form 8-K;
iii.A term loan in the principal amount of $30.0 million under the Second Lien Credit Agreement (as defined below) (the “Second Lien Term Loan”); and
iv.An aggregate cash payment in the amount of approximately $30.0 million to be used, in part, for the repayment of certain indebtedness of Estrella and payment of certain Estrella transaction expenses.
The shares of Class A Common Stock issuable upon the exercise of the Warrant and the shares of Class A Common Stock issuable upon the exercise of the Option Agreement (as defined below) represent approximately 43% of the outstanding shares of Class A Common Stock on a fully diluted basis (assuming the full exercise of the Warrant and the Option Agreement).
The Warrant, the shares of Series B Preferred Stock and the Second Lien Term Loan will initially be held by an affiliate of HPS.
The Asset Purchase Agreement requires MediaCo to prepare and file with the Commission a proxy statement to be sent to MediaCo stockholders relating to a special meeting of MediaCo stockholders (the “Stockholders Meeting”) to be held to consider approval of the issuance of shares of Class A Common Stock upon exercise of the Warrant and the issuance of shares of Class A Common Stock pursuant to the Option Agreement (the “Proposal”). The board of directors of MediaCo (the “Board”) has directed that the Proposal be submitted to a vote at the Stockholders Meeting and recommended that MediaCo’s stockholders vote in favor of approval of the Proposal.
The Asset Purchase Agreement includes representations, warranties and covenants of the parties customary for a transaction of this nature.
Option Agreement
On April 17, 2024, in connection with the Transactions contemplated by the Asset Purchase Agreement (the “Transactions”), MediaCo and Purchaser entered into an Option Agreement (the “Option Agreement”) with Estrella and certain subsidiaries of Estrella pursuant to which (i) Purchaser was granted the option to purchase 100% of the equity interests of certain subsidiaries of Estrella holding the Estrella Broadcast Assets (the “Option Subsidiaries Equity”) in exchange for 7,051,538 shares of Class A Common Stock, and (ii) Estrella was granted the right to put the Option Subsidiaries Equity to Purchaser for the same consideration beginning six months after the date of the closing of the Transactions (the “Closing Date”).
Voting and Support Agreement
On April 17, 2024, in connection with the Transactions, SG Broadcasting LLC (“SG Broadcasting”), the holder of shares of Class A Common Stock and Class B Common Stock, par value $0.01 per share (“Class B Common Stock”) representing a majority of the voting power of the shares of MediaCo, entered into a Voting and Support Agreement with MediaCo and Estrella (the “Voting and Support Agreement”), pursuant to which SG Broadcasting agreed to, among other things, and subject to the terms and conditions set forth therein, at any meeting of MediaCo stockholders (including the Stockholders Meeting), or at any adjournment or postponement thereof, vote in favor of the Proposal and against any action or proposal that would reasonably be expected to prevent or materially delay consummation of the Proposal. The Voting Agreement also includes certain customary restrictions on SG Broadcasting’s ability to transfer its shares of MediaCo stock. The Voting Agreement will automatically terminate upon the date on which the Proposal is approved.
On April 17, 2024, in connection with the Transactions, MediaCo issued the Warrant, which provides for the purchase of up to 28,206,152 shares of Class A Common Stock (the “Warrant Shares”), subject to customary adjustments as set forth in the Warrant, at an exercise price per share of $0.00001. Subject to certain limitations, the Warrant also provides that the Warrant holder has the right to participate in distributions on Class A Common Stock on an as-exercised basis. The Warrant further provides that in no event shall the aggregate number of Warrant Shares issuable to the Warrant holder upon exercise of the Warrant exceed 19.9% of the aggregate number of shares of common stock of MediaCo outstanding, or the voting power of such outstanding shares of common stock, on the business day immediately preceding the issue date for such Warrant Shares, calculated in accordance with the applicable rules of the Nasdaq Capital Market (“Nasdaq”), unless and until the Proposal has been approved.
First Lien Term Loan
In order to finance the Transactions, MediaCo and its direct and indirect subsidiaries entered into a maximum $45.0 million first lien term loan credit facility, dated April 17, 2024 (the “First Lien Credit Agreement”), with White Hawk Capital Partners, LP, as term agent thereunder, and the lenders party thereto. Under the terms of the First Lien Credit Agreement, MediaCo received an initial term loan of $35.0 million on April 17, 2024 (the “Initial Loan”) and was provided with a subsequent delayed draw facility of up to $10.0 million that may be provided for additional working capital purposes under certain conditions (the “Delayed Draw” and the loans thereunder, the “Delayed Draw Term Loans”). The Initial Loan and Delayed Draw Term Loans are collectively referred to as the “First Lien Term Loans.” The proceeds of the Initial Loan were used to finance the Transactions, pay off certain existing indebtedness in connection therewith and pay related fees and transaction costs. The Initial Loan will mature on April 17, 2029, and each Delayed Draw Term Loan will mature on the date that is two years after the drawing of such Delayed Draw Term Loan. First Lien Term Loans will be subject to monthly amortization payments equal to 0.8333% of the initial principal amount of the First Lien Term Loans, and monthly interest payments at a rate of SOFR + 6.00%. The First Lien Term Loans are subject to a borrowing base in accordance with the terms of the First Lien Credit Agreement.
Second Lien Term Loan
In addition, MediaCo and its direct and indirect subsidiaries entered into a $30.0 million second lien term loan credit facility, dated April 17, 2024 (the “Second Lien Credit Agreement”), with HPS as term agent, and the lenders party thereto. Under the terms of the Second Lien Credit Agreement, MediaCo was deemed to receive the Second Lien Term Loan of $30.0 million on April 17, 2024 in exchange for the Transactions. The Second Lien Term Loan will mature on April 17, 2029 and will be subject to monthly interest payments at a rate of SOFR + 6.00%. The Second Lien Term Loans are subject to a borrowing base in accordance with the terms of the Second Lien Credit Agreement.
Stockholders Agreement
On April 17, 2024, in connection with the Transactions, MediaCo entered into a stockholders’ agreement with SG Broadcasting and Aggregator (the “Stockholders Agreement”). The Stockholders’ Agreement provides Aggregator (i) the right to designate up to three individuals for election to the Board (each such designee, an “Investor Director Designee”), subject to reduction and termination based on certain MediaCo stock ownership requirements (including that such designation right falls away upon Aggregator ceasing to beneficially own at least ten percent (10%) of the fully diluted MediaCo common stock for ten consecutive days), and (ii) certain consent rights over material actions taken by MediaCo.
Registration Rights Agreement
On April 17, 2024, in connection with the Transactions, MediaCo entered into a registration rights agreement with SG Broadcasting and Aggregator (the “Registration Rights Agreement”), pursuant to which MediaCo has granted each of SG Broadcasting and Aggregator customary underwritten shelf takedown and piggyback rights with respect to the registration of shares of Class A Common Stock with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). In addition, MediaCo has agreed to prepare and Section 21Efile within three months of the Securities Exchange ActClosing Date a registration statement covering the sale or distribution of 1934,shares of Class A Common Stock held by SG Broadcasting and Aggregator.
Network Affiliation and Supply Agreements
On April 17, 2024, in connection with the Transactions, Purchaser entered into a Network Program Supply Agreement (the “Network Program Supply Agreement”) with certain subsidiaries of Estrella that operate radio broadcast stations (the “Radio Stations”). Pursuant to the Network Program Supply Agreement, Purchaser has agreed to license certain programs and other material to the Radio Stations for distribution on the Radio Stations’ broadcast channels.
On April 17, 2024, in connection with the Transactions, Purchaser entered into a Network Affiliation Agreement (the “Network Affiliation Agreement”) with certain subsidiaries of Estrella that operate television broadcast stations (the “TV Stations”). Pursuant to the Network Affiliation Agreement, Purchaser has agreed to license certain programs and other material to the TV Stations for distribution on the TV Stations’ broadcast channels.
Relationship and Agreements with Emmis
MediaCo was formed by Emmis in connection with a transaction (the “Transactions”) with SG Broadcasting that involved, among other things, Emmis conveying the assets of radio stations WBLS-FM and WQHT-FM (the “New York Radio Stations”) to MediaCo (the “Separation”) and distributing (the “Distribution”) all of MediaCo’s Class A Shares to all of Emmis’ shareholders pro rata. Emmis and the Company operate separately, each as amended. You can identifyan independent public company. In connection with the Separation, we and Emmis entered into certain agreements to affect the separation of our business from Emmis and govern our relationship with Emmis after the Separation. The following is a summary of the terms of the material agreements that we have entered into with Emmis. These summaries set forth the terms of the agreements that we believe are material and are qualified in their entirety by reference to the full text of such agreements.
Transaction Agreement
On June 28, 2019, we entered into a certain Contribution and Distribution Agreement with Emmis and SG Broadcasting (the “Transaction Agreement”). The Transaction Agreement sets forth our agreements with Emmis and SG Broadcasting regarding the principal actions to be taken in connection with the Transactions. The Transaction Agreement identified assets to be transferred, liabilities to be assumed and contracts to be assigned to the Company as part of the separation, and it provided for when and how these forward-looking statementstransfers, assumptions and assignments will occur.
Initial Contribution, SG Broadcasting Investment, Purchase Price and Adjustment. At the closing of the Transactions and pursuant to the terms of the Transaction Agreement, SG Broadcasting made an investment in MediaCo (the “Initial SG Broadcasting Investment”) consisting of $41,500,000 plus the $6,250,000 for additional working capital purposes. As consideration for the SG Broadcasting Investment, MediaCo issued to SG Broadcasting a convertible promissory note payable by ourMediaCo in the amount of $6,250,000 (the “Original SG Broadcasting Promissory Note”) and issued to SG Broadcasting 5,359,753 Class B Shares, which constituted all of the issued and outstanding Class B Shares, representing in the aggregate an approximately 76.28% equity ownership interest and 96.98% of the outstanding voting interests of MediaCo immediately following the Transactions. Contemporaneously, Emmis contributed the assets of the NY Radio Stations to MediaCo and MediaCo paid to Emmis the sum of $91,500,000 (the “Purchase Price”), issued the Emmis Promissory Note, secured the use of words such as “intend,” “plan,” “may,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity”$5,000,000 of working capital from Emmis which was required to be repaid within nine months following the closing of the Transactions (and was so repaid), and similar expressions, whetherissued to Emmis 1,666,667 Class A Shares, which constituted all of the issued and outstanding Class A Shares and represented in the negativeaggregate approximately 23.72% equity ownership interest and 3.02% of the outstanding voting interests of MediaCo immediately following the Transactions. In connection with the Distribution, Emmis was issued an additional 16,619 Class A Shares in order to enable 0.1265 Class A Shares to be distributed for each share of Emmis common stock outstanding, and SG Broadcasting was issued an additional 53,444 Class B Shares to enable SG Broadcasting to retain its proportionate ownership percentage in MediaCo.
Contemporaneously with the close of the Transactions, to fund the Purchase Price, the Company entered into a five-year senior secured term loan agreement (the “Senior Credit Facility”) by and among MediaCo Holding Inc., the other parties designated as borrowers thereto, the financial institutions from time to time party thereto, and GACP Finance Co., LLC, a Delaware limited liability company, as administrative agent and collateral agent. The Senior Credit Facility originally provided for initial borrowings of up to $50,000,000, which net proceeds, along with the proceeds from the Initial SG Broadcasting and the Original SG Broadcasting Promissory Note, were paid to Emmis as consideration for the NY Radio Stations, as well as one tranche of additional borrowings of $25,000,000. On December 13, 2019, the Company entered into an amendment and restatement of the Senior Credit Facility (the “Amended and Restated Senior Credit Facility”) to provide for an additional approximately $23,500,000 in incremental term loans, the proceeds of which were used to fund the Company’s obligations in connection with the transactions.
On December 9, 2022, following the consummation of the transactions contemplated by the Purchase Agreement, the Company repaid in full, without penalty, all of its obligations under the Senior Credit Facility, which was terminated at that time.
Indemnification. The Transaction Agreement provides for releases with respect to pre closing claims arising from the Transactions, and with respect to post Distribution claims, except as otherwise provided in the Transaction Agreement, indemnifications principally designed to place financial responsibility for obligations and liabilities allocated to MediaCo under the Transaction Agreement with MediaCo and financial responsibility for obligations and liabilities allocated to Emmis under the Transaction Agreement with Emmis. Other than in limited circumstances, Emmis shall only be responsible for certain breaches of representations and warranties if losses exceed one percent (1%) and the maximum recovery is limited to ten percent (10%) of the Purchase Price.
Other Matters Governed by the Contribution and Distribution Agreement. Other matters governed by the Transaction Agreement include, without limitation, access to financial and other information, insurance, confidentiality and access to and provision of records.
Emmis Promissory Note
The Emmis Promissory Note carries interest at a base rate equal to the interest on any senior credit facility of MediaCo, or affirmative. Such forward-looking statements, which speak onlyif no senior credit facility is outstanding, of 6.00%, and an additional increase of 1.00% following the second anniversary of the date of issuance and additional increases of 1.00% following each successive anniversary thereafter. The Emmis Promissory Note has a maturity date of the fifth (5th) anniversary of its execution. Additionally, the Emmis Promissory Note will be payable in interest in kind through maturity, and will be convertible into Class A Shares at the option of Emmis beginning six (6) months after issuance and at a strike price equal to the thirty (30) day volume weighted average price of the Class A Shares on the date of conversion.
On August 19, 2022, Emmis exercised its right under the Emmis Convertible Promissory Note to convert thirty thousand dollars ($30,000.00) of the outstanding principal for 11,000 shares of the Company’s Class A common stock. On December 21, 2022, Emmis exercised its right under the Emmis Convertible Promissory Note to convert $0.9 million of the outstanding principal and $0.1 million of accrued but unpaid interest for 0.8 million shares of the Company's Class A common stock.
Shared Services Agreements
At closing of the Transactions, we entered into two Shared Services Agreements with Emmis. Historically, Emmis has operated radio stations WLIB AM and WEPN FM (which were retained by Emmis) from many of the same facilities and using many of the same personnel as used in the operation of NY Radio Stations. The Shared Services Agreements became operative as of the date hereof, are based on managements’ estimates, assumptionscompletion of the Separation to allow Emmis to continue to use MediaCo’s facilities, equipment and beliefs regarding our future plans, intentionspersonnel consistent with past practices. Emmis is to reimburse MediaCo for all incremental out of pocket costs and expectations. We cannot guarantee thatexpenses incurred by MediaCo in connection with this arrangement.
Antenna Site Agreement
At closing of the Transactions, we will achieve these plans, intentions or expectations. All statements regarding our expected financial position, business, results of operations and financing plans are forward-looking statements.
Actual results or events could differ materiallyentered into an Antenna Site Agreement with WLIB. Historically, WBLS FM has used the antenna site owned by WLIB in Lyndhurst, New Jersey as an emergency backup site from the plans, intentions or expectations disclosedwhich to broadcast WBLS FM’s programs in the forward-looking statements we make. We have included important facts in various cautionary statements in this report that we believe could cause our actual resultsevent its other broadcast antennas are unavailable. The Antenna Site Agreement allows WBLS FM antenna space on the WLIB tower, as well as ground space for WBLS FM transmission equipment. The Antenna Site Agreement is to differ materially from forward-looking statements that we make. These include, but arelast for an initial term of 20 years, with two automatic renewal periods of 10 years each, unless MediaCo provides notice to WLIB of its intention to not limitedrenew the lease for an additional term. MediaCo is to pay to WLIB an annual license fee of ten dollars ($10.00).
Previously Terminated Agreements
At closing of the Transactions, MediaCo entered into an Employee Leasing Agreement, a Management Agreement and a Local Programming and Marketing Agreement with Emmis. All of such agreements were terminated by mutual agreement prior to 2022.
Relationship and Agreements with SG Broadcasting
At the closing of the Transactions and pursuant to the factors describedterms of the Transaction Agreement, SG Broadcasting made the Initial SG Broadcasting Investment. As consideration for the Initial SG Broadcasting Investment, MediaCo issued to SG Broadcasting the Original SG Broadcasting Promissory Note and 5,359,753 Class B Shares, which constituted all of the issued and outstanding Class B Shares, representing in Part I, Item 1A, “Risk Factors.”the aggregate an approximately 76.28% equity ownership interest and 96.98% of the outstanding voting interests of MediaCo immediately following the Transactions. Following closing of the Transactions, SG Broadcasting owns all of the issued and outstanding Class B Shares, representing an approximately 76.28% equity ownership interest and a 96.98% voting interest in MediaCo.
On February 28, 2020, MediaCo amended and restated the Original SG Promissory Note to allow SG Broadcasting to fund up to an additional $4 million (the “Amended and Restated SG Promissory Note”), and on March 27, 2020, further amended and restated the Amended and Restated SG Promissory Note to allow SG Broadcasting to fund up to an additional $9.75 million (the “Second Amended and Restated SG Promissory Note”). On September 30, 2020, SG Broadcasting loaned an additional $0.3 million to the Company pursuant to an additional SG Broadcasting Promissory Note (the “Second SG Promissory Note, and together with the Amended and Restated SG Promissory Note, the “SG Broadcasting Notes”). The forward-looking statements do not reflectSG Broadcasting Notes carry interest at a base rate equal to the potential impactinterest on any senior credit facility, or if no senior credit facility is outstanding, of any future acquisitions, mergers or dispositions. We undertake6.00%, and an additional increase of 1.00% following the second anniversary of the date of issuance and additional increases of 1.00% following each successive anniversary thereafter. The SG Broadcasting Notes will have a maturity date of six (6) months after the fifth (5th) anniversary of execution of the Original SG Promissory Note. Additionally, the SG Broadcasting Notes will be payable in interest in kind through maturity. Subject to the Share Cap (as defined in Proposal 3), the SG Broadcasting Notes are convertible into Class A Shares at the option of SG Broadcasting at a strike price equal to the thirty (30) day volume weighted average price of the Class A Shares on the date of conversion. On July 28, 2022, SG Broadcasting exercised its right under the SG Broadcasting Promissory Notes to fully convert the outstanding principal and accrued but unpaid interest into the Company's Class A common stock, and the 2019/2020 SG Broadcasting Promissory Notes were terminated at that time, while the May 2021 SG Broadcasting Promissory Note remains outstanding, but with no obligation to update or revise any forward-looking statements becauseamounts outstanding as of new information, future events or otherwise.December 31, 2022.
PART I
ITEM 1. BUSINESS
GENERAL
MediaCo Holding Inc.Purchase Agreement (the “Assignment and Assumption Agreement”) by and between Billboards LLC, a Delaware limited liability company (“MediaCo” orBillboards LLC”) and the “Company”Company, regarding that certain Equity Purchase Agreement, dated as of October 16, 2019 (the “Purchase Agreement”), by and among Billboards LLC, FMG Kentucky, LLC, a Delaware limited liability company (“FMG Kentucky), FMG Valdosta, LLC, a Delaware limited liability company (together with FMG Kentucky, the “Acquired Companies”), and Fairway Outdoor Advertising Group, LLC, a Delaware limited liability company (“Fairway”). Billboards LLC is a wholly-owned subsidiary of Standard General L.P., a New York-based investment firm (“Standard General”). Standard General is an ownedaffiliate of the controlling shareholder of the Company, SG Broadcasting. The transactions contemplated by the Purchase Agreement closed concurrently with the Company’s entry into the Assignment and operated multi-media company formedAssumption Agreement. At the same time, MediaCo issued to SG Broadcasting 220,000 MediaCo Series A Preferred Shares in Indiana in 2019, focused on radio and digital advertising, premium programming and events.
Our assets consistexchange for a cash contribution of two radio stations, WQHT(FM) and WBLS(FM), which serve the New York City demographic market area that primarily targets Black, Hispanic, and multi-cultural consumers. We derive our revenues primarily from radio and digital advertising sales, but we also generate revenues from events, including sponsorships and ticket sales, licensing, and syndication.
$22,000,000. On December 9, 2022 Fairway Outdoor LLC, FMG Kentucky, LLC and FMG Valdosta, LLC (collectively, “Fairway”), all of which are wholly owned direct and indirect subsidiaries of MediaCo, entered into an Asset Purchase Agreement (the “Purchase Agreement”), with The Lamar Company, L.L.C., a Louisiana limited liability company (the “Purchaser”). The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement. The purchase price was $78.6 million, subject to certain customary adjustments, paid at closing in cash. The sale resulted in a pre-tax gain of $46.9 million in the fourth quarter of 2022.
We have classified the related assets and liabilities associated with our Fairway business as discontinued operations in our consolidated balance sheets and the results of our Fairway business have been presented as discontinued operations in our consolidated statements of income for all periods presented through December 9, 2022 as the sale represented a strategic shift in our business that had a major effect on our operations and financial results. Unless otherwise noted, discussion refers to the Company's continuing operations. See Note 2 — Discontinued Operations in our consolidated financial statements included elsewhere in this report for additional information.
Unless the context otherwise requires, references to “we”, “us” and “our” refer to MediaCo and its subsidiaries.
BUSINESS STRATEGY
We are committed to improving the operating results of our core assets while simultaneously seeking future growth opportunities in new radio businesses that focus predominately on multi-cultural audiences in the national and digital advertising spaces. Our strategy is focused on the following operating principles:
Develop unique and compelling content and strong brands
Our established nationally recognized media brands have achieved and sustained a leading position in their respective local market segments over many years, with each having a strong brand identity that reaches beyond its local footprint. The knowledge of the New York market and consistently producing unique and compelling content that meets the needs of our target audiences are critical to our success. As such, we make substantial investments in areas such as market research, data analysis and creative talent to ensure that our content remains relevant and fresh, has a meaningful impact on the communities we serve and reinforces the core brand image of each respective property.
Extend the reach and relevance of our local brands through digital platforms
In recent years, we have placed substantial emphasis on enhancing the distribution of our radio content through digital and mobile platforms. We believe these digital platforms offer excellent opportunities to further enhance the relationships we have with our audiences by allowing them to consume and share our content in new ways and providing us with new distribution channels for one-to-one communication with our end user.
Deliver results to advertisers
Competition for advertising revenue is highly competitive and becoming more so as the overall market has declined due to shifts in the way advertising dollars are directed. To remain competitive, we focus on sustaining and growing our radio audiences, optimizing our pricing strategy and developing innovative marketing programs for our clients that allow them to interact with our audiences in more direct and measurable ways. These programs often include elements such as on-air endorsements, events, contests, special promotions, Internet advertising, email marketing, interactive mobile advertising and online video. Our ability to deploy multi-touchpoint marketing programs allows us to deliver a stronger return-on-investment for our clients while simultaneously generating ancillary revenue streams for our media properties.
Extend sales efforts into new market segments
Given the competitive pressures in many of our “traditional” advertising categories, we have been expanding our network of advertiser relationships into not-for-profits, political advertising, corporate philanthropy, environmental initiatives and government agencies. These efforts primarily focus on the health care and education sectors. We believe our capabilities can address these clients’ under-served needs.
Enhance the efficiency of our operations
We believe it is essential that we operate our businesses as efficiently as possible. We regularly review our business operations and reduce costs or realign resources as necessary. We have also invested in technology solutions to help further streamline our business processes.
Pursue acquisition and investment opportunities
We may pursue acquisitions or other investment opportunities in a variety of media-related businesses as well as a variety of other industries and market sectors. We believe that consummating such acquisitions and investments can be a valuable tool in our efforts to grow our business.
Leverage the power of the brands
We believe our brands are well integrated within the Hip Hop and R&B marketplace. We will continue to expand our national reach on each of our brands through the digital, streaming, syndication and licensing arenas. Our celebrity talent has broad national and international influence and are integrated into key cultural moments, which help amplify our brands.
RADIO STATIONS
In the following table, “Market Rank by Revenue” is the ranking of the market revenue size of the principal radio market served by our stations among all radio markets in the United States. Market revenue rankings are from BIA’s Investing In Radio 2022, fourth edition. “Ranking in Primary Demographic Target” is the ranking of the station within its designated primary demographic target among all radio stations in its market based on the December 2022 Nielsen Audio, Inc. (“Nielsen”) Portable People Meter results. A “t” indicates the station tied with another station for the stated ranking. “Station Audience Share” represents a percentage generally computed by dividing the average number of persons in the primary demographic listening to a particular station during specified time periods by the average number of such persons in the primary demographic for all stations in the market area as determined by Nielsen.
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| STATION AND MARKET | | MARKET RANK BY REVENUE | | FORMAT | | PRIMARY DEMOGRAPHIC TARGET AGES | | RANKING IN PRIMARY DEMOGRAPHIC TARGET | | STATION AUDIENCE SHARE |
| New York, NY | | 2 | | | | | | | | |
| WQHT(FM) | | | | Hip-Hop | | 18-34 | | 5 | | 5.1 |
| WBLS(FM) | | | | Urban Adult Contemporary | | 25-54 | | 3 | | 6.2 |
RADIO ADVERTISING SALES
Our stations derive their advertising revenue from local and regional spot radio and digital advertising in the marketplaces in which they operate, as well as from the sale of national advertising. Local and most regional sales are made by a station’s sales staff. National sales are made by firms specializing in such sales, which are compensated on a commission-only basis. We believe that the volume of national advertising revenue tends to adjust to shifts in a station’s audience share position more rapidly than does the volume of local and regional advertising revenue. During the year ended December 31, 2022, approximately 22% of our total spot radio advertising revenues were derived from national sales and 78% were derived from local sales.
NON-TRADITIONAL REVENUES
Our stations are involved with numerous events in the market in which we operate, that support the local community, entertain our audiences, and better connect our listeners with our stations and our advertisers. In most cases, a third party produces the event, which we help promote, and we sell certain sponsorship opportunities to our advertisers. In these situations, we do not bear financial risk on the success of the event. In limited cases, such as Hot 97's Summer Jam, we produce the event, including securing the performing artists and venue, and are primarily responsible for the financial risk and reward, including ticket and sponsorship sales associated with the event.
NEW TECHNOLOGIES
We believe that the growth of new technologies not only presents challenges, but also opportunities for broadcasters. The primary challenge is increased competition for the time and attention of our listeners. The primary opportunity is to further enhance the relationships we already have with our listeners by expanding products and services offered by our radio stations to adjacent areas of entertainment, including streaming, gaming, and sports, and to increase audience reach via connected devices.
COMMUNITY INVOLVEMENT
We believe that to be successful, we must be integrally involved in the communities we serve. We see ourselves as community partners. To that end, our radio stations participate in many community programs, fundraisers and activities that benefit a wide variety of causes. Charitable organizations that have been the beneficiaries of our support include, among others, Hip Hop has Heart, the Harlem Chamber of Commerce, the Sarcoidosis Foundation, New York Cares, American AIDS Foundation and the Queens Police Service Area Community Counsel. We have embarked on a relationship with the Universal Hip Hop Museum, which is currently under construction in New York City.
In January 2022, we helped raise over $1 million by broadcasting a day-long fundraiser for the families impacted by the Bronx apartment fire at Twin Parks North-West.
COMPETITION
Radio broadcasting stations compete with the other broadcasting stations in their respective market areas, as well as with other advertising media such as newspapers, cable, magazines, outdoor advertising, transit advertising, the Internet, satellite radio, streaming services, direct marketing, and mobile and wireless device marketing. Competition within the broadcasting industry occurs primarily in individual market areas, so that a station in one market (e.g., New York) does not generally compete with stations in other markets (e.g., Los Angeles). Our stations face competition from other stations with substantial financial resources, including stations targeting the same demographic groups. In addition to management experience, factors that are material to competitive position include the station's rank in its market in terms of the number of listeners, authorized power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other stations in the market area. We attempt to improve our competitive position with programming and promotional campaigns aimed at the demographic groups targeted by our stations. We also seek to improve our position through sales efforts designed to attract advertisers that have done little or no radio advertising by emphasizing the effectiveness of radio advertising in increasing the advertisers' revenues. The policies and rules of the FCC permit certain joint ownership and joint operation of local stations. Our radio stations take advantage of these joint arrangements when appropriate to lower operating costs and to offer advertisers more attractive rates and services. Although we believe that each of our stations can compete effectively in its market, there can be no assurance that either of our stations will be able to maintain or increase its current audience ratings or advertising revenue market share.
Although the broadcasting industry is highly competitive, barriers to entry exist. The operation of a broadcasting station in the United States requires a license from the FCC. Also, the number of stations that can operate in a given market is limited by the availability of the frequencies that the FCC will license in that market, as well as by the FCC's multiple ownership rules regulating the number and types of stations that may be owned or controlled by the same person or company.
In selecting the form of media through which to advertise, advertisers evaluate their ability to target audiences having a specific demographic profile, lifestyle, brand or media consumption or purchasing behavior, or audiences located in, or traveling through, a particular geography. Advertisers also compare the relative costs of available media, evaluating the number of impressions (potential viewings), exposure (the opportunity for advertising to be seen) and circulation (traffic volume in a market), as well as potential effectiveness, quality of related services (such as advertising copy design and layout) and customer service. In competing with other media, we believe that radio is more cost-efficient than other media, allowing advertisers to reach broader audiences and target specific geographic areas or demographic groups within markets. Additionally, the strength of our digital reach and brand recognition allows us to compete for national digital advertising dollars.
HUMAN CAPITAL RESOURCES
Our mission is to connect brands and consumers by delivering innovative advertising insights and solutions while enhancing our communities. We believe that our success is dependent upon successful execution of this mission, and a critical component in achieving this mission is attracting, motivating and retaining great people who allow us to continue to find new and innovative ways to serve our customers and our communities. We believe our key human capital management objective is to attract, retain and develop the highest quality talent and subject matter experts in the sectors we operate. We believe an alignment between talent and strategy is key to scaling the business.
At December 31, 2022, we had 141 full-time and part-time employees, compared to 192 at December 31, 2021, at which earlier date 49 of which employees were employed in our disposed outdoor advertising business.
To facilitate talent attraction and retention, we strive to create strong teams and vibrant culture at every level of our organization through our core values of integrity, innovation, excellence and safety. We also strive to offer a fair and competitive compensation and benefits program, foster a community where everyone feels included and empowered to do their best work, provide a safe workplace, and give employees the opportunity to give back to their communities and make a social impact. We believe people can achieve their full potential when they enjoy their work, so it is our priority to provide a workplace where growth, success and fun go hand in hand. We are implementing annual goal-setting and performance management processes, as well as formal surveys of our employees on a periodic and ongoing basis to measure engagement and identify areas for improvement.
Code of Business Conduct
We are deeply committed to promoting a culture of ethical conduct and compliance. Our Code of Business Conduct and Ethics, which applies to all employees as well as officers and all members of the Board, reinforces our core values and helps drive our workplace culture of compliance with ethical standards, integrity and accountability. Training on the Code is mandatory upon employment and is provided on an annual basis. Highlights from our Code include a no retaliation policy for anyone who, acting in good faith, notifies us of a possible violation of the Code, our policies or the law; a commitment to human rights and labor protections in all of our operations, and the expectation that our business partners uphold the same standards; and an anti-corruption policy that prohibits offering, attempting to offer, authorizing or promising any bribe or kickback for the purpose of obtaining or retaining business or an unfair advantage.
Compensation and Benefits Programs
Our compensation and benefits programs are designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide competitive packages to address the needs of the individuals we employ to ensure we have alignment with culture, expectations and value driven results. Our sales employees are incentivized through sales commission programs. Our executives and certain other employees receive long-term equity awards that vest over time. We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests.
We also provide our employees and their families with access to a variety of healthcare and insurance benefits, qualified spending accounts, retirement savings plans and various other benefits.
Diversity and Inclusion
We are an equal opportunity employer and are committed to providing a work environment that is free of discrimination and harassment. We respect and embrace diversity of thought and experience and believe that a diverse workforce produces more innovative insights and solutions, resulting in better products and services for our customers. As we bring brands face-to-face with people, we believe our teams need to be as diverse in their composition and outlook as the audiences we reach every day, and we work together to create an inclusive environment where everyone can bring their true selves to work. We work on building teams that reflect the life experiences of those we serve. Our teams align with our mission and values; of the 141 full-time and part-time employees driving the business, over 78% are Black, Hispanic, or Asian, and 43% are female.
Community Involvement
One of our guiding principles is making a difference in the communities we serve, and our corporate social responsibility initiatives are an important part of our culture. We believe that building connections between our employees, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace. As a company, we endeavor to use our resources and products to drive meaningful societal change and have collaborated with local and national organizations globally to improve health and public safety; to ensure a sustainable environment; to promote arts, education and cultural diversity; and to support market-by-market advertising standards. MediaCo aims to be purposeful and do the right thing and over the years we have worked with our community to educate, understand, guide and amplify their voices to ensure our audience feels heard and appreciated.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Listed below is certain information about the executive officers of MediaCo as of December 31, 2022. All of our executive officers serve at the pleasure of the Board of Directors. There are no family relationships among any of our executive officers or directors.
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| NAME | | POSITION | | AGE AT DECEMBER 31, 2022 | | YEAR FIRST ELECTED OFFICER |
| Rahsan-Rahsan Lindsay | | Chief Executive Officer and Director | | 51 | | 2021 |
| Bradford A. Tobin | | President, Chief Operating Officer and General Counsel | | 40 | | 2020 |
| Ann C. Beemish | | Executive Vice President, Chief Financial Officer and Treasurer | | 50 | | 2021 |
Mr. Lindsay was appointed to the position of Chief Executive Officer in June 2021. Prior to joining MediaCo, Mr. Lindsay served as the Executive Vice President of Advertising Sales and Marketing for Urban One, Inc. for nine years, where he oversaw advertising sales, integrated marketing, and sales operations for TV One and sister network CLEO TV, which he helped launch in 2019. In 2020, he took over as head of iOne Digital ad sales and One Solution, Urban One’s cross-platform marketing group, as well as One X Studios, the branded content production arm of Urban One. Mr. Lindsay has been a member of the Advisory Board of Rutgers University School of Business since 2018. In addition, he maintains a seat on the International Radio and Television Society board, a position that he has held for the past four years and serves as the co-chair of the board of directors for The Brotherhood/Sister Sol, a Harlem-based nonprofit organization providing education and personal development, career training and support services to underserved youth.
Mr. Tobin has served as President, Chief Operating Officer, and General Counsel since June 2021, after being appointed as Chief Operating Officer in August 2020. Mr. Tobin has over 15 years of legal and operational experience. Prior to joining the Company, Mr. Tobin served as General Counsel, Chief Compliance Officer and Secretary of Standard Diversified Inc. (a former affiliate of the Company), and before that served as the General Counsel and Senior Vice President of General Wireless Operations Inc. d/b/a RadioShack. Preceding this role, Mr. Tobin served on the distressed debt team at Silver Point Capital, LP.
Ms. Beemish was appointed to the position of Executive Vice President, Chief Financial Officer and Treasurer in November 2021. Ms. Beemish was previously the Senior Vice President of Finance at MediaCo since March 2021. Prior to joining MediaCo, Ms. Beemish served as Knotel's Head of Global Administration and Readiness and Head of Global People Operations. She founded consultancy Huppe Beemish LLC in 2016 and served as Senior Vice President of Operational Finance and Corporate Development at Granite Broadcasting. Ms. Beemish began her career as an investment banker at Donaldson, Lufkin & Jenrette and Merrill Lynch. She holds an MBA from New York University's Leonard N. Stern School of Business and a bachelor's degree from Saint John's University.
AVAILABLE INFORMATION
Our website address is mediacoholding.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are filed with the U.S. Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
FEDERAL REGULATION OF BROADCASTING
Radio broadcasting in the United States is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”), including as amended in part by the Telecommunications Act of 1996 (the “1996 Act”). Radio broadcasting is prohibited except in accordance with a license issued by the FCC upon a finding that the public interest, convenience and necessity would be served by the grant of such license. The FCC has the power to revoke licenses for, among other things, false statements made in FCC filings or willful or repeated violations of the Communications Act or of FCC rules. In general, the Communications Act provides that the FCC shall allocate broadcast licenses for radio stations so as to provide a fair, efficient and equitable distribution of service throughout the United States. The FCC determines the operating frequency, location and power of stations; regulates the equipment used by stations; and regulates numerous other areas of radio broadcasting pursuant to rules, regulations and policies adopted under authority of the Communications Act. The Communications Act, among other things, prohibits the assignment of a broadcast license or the transfer of control of an entity holding such a license without the prior approval of the FCC. Under the Communications Act, the FCC also regulates certain aspects of media that compete with broadcast stations.
The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Reference should be made to the Communications Act as well as FCC rules, public notices and rulings for further information concerning the nature and extent of federal regulation of radio stations. Legislation has been introduced from time to time which would amend the Communications Act in various respects or otherwise affect the Company, and the FCC from time to time considers new regulations or amendments to its existing regulations. We cannot predict whether any such legislation will be enacted or whether new or amended FCC regulations will be adopted or what their effect would be on the Company.
License Renewal
Radio stations operate pursuant to broadcast licenses that are ordinarily granted by the FCC for maximum terms of eight years and are subject to renewal upon application and approval by the FCC. License renewal applications for both WQHT(FM) and WBLS(FM) were granted in July 2022. The following table sets forth our current FCC license expiration dates in addition to the call letters, license classification, antenna elevation above average terrain, power and frequency of all owned stations as of December 31, 2022:
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| Radio Market | | Stations | | City of License | | Frequency | | Expiration Date of License | | FCC Class | | Height Above Average Terrain (in feet) | | Power (in Kilowatts) |
| New York, NY | | WQHT(FM) | | New York, NY | | 97.1 | | June 2030 | | B | | 1,339 | | 6.7 |
| | WBLS(FM) | | New York, NY | | 107.5 | | June 2030 | | B | | 1,362 | | 4.2 |
Review of Ownership Restrictions
The FCC is required by statute to review its broadcast ownership rules on a quadrennial basis (i.e., every four years) and to repeal or modify rules that are no longer “necessary in the public interest.”
Despite several such reviews and appellate remands, the FCC’s rules limiting the number of radio stations that may be commonly owned in a local market have remained largely unchanged since their initial adoption following the 1996 Act. The FCC’s previous ownership reviews have been subject to litigation. In April 2021, the U.S. Supreme Court reversed a lower court decision blocking a number of FCC rule changes designed to update the FCC’s media ownership regulations. As a result, the FCC’s Radio/Television Cross-Ownership Rule, which limited the number of radio and television and stations that could be commonly owned in a single market, was eliminated.
The FCC initiated its 2018 quadrennial review in December 2018 and that proceeding remains pending. The 2022 quadrennial review was launched in December 2022 and that proceeding also remains pending. We cannot predict whether either of the quadrennial review proceedings will result in modifications of the ownership rules or the impact (if any) that such modifications would have on our business.
Attribution of Ownership Interests:
In applying its ownership rules, the FCC has developed specific criteria that it uses to determine whether a certain ownership interest or other relationship with an FCC licensee is significant enough to be “attributable” or “cognizable” under its rules, such that there would be a violation of the FCC’s rules where such person or entity holds attributable interests in more than the permitted number of stations or a prohibited combination of outlets in the same market. The FCC’s regulations generally deem the following relationships and interests to be attributable for purposes of its ownership restrictions:
•all officer and director positions in a licensee or its direct/indirect parent(s);
•voting stock interests of at least 5% (or 20%, if the holder is a passive institutional investor, i.e., a mutual fund, insurance company or bank);
•any equity interest in a limited partnership or limited liability company where the limited partner or member has not been “insulated” from the media-related activities of the LP or LLC pursuant to specific FCC criteria;
•equity and/or debt interests which, in the aggregate, exceed 33% of the total asset value of a station or other media entity (the “equity/debt plus policy”), if the interest holder supplies more than 15% of the station’s total weekly programming (usually pursuant to a time brokerage, local marketing or network affiliation agreement) or is a same-market media entity (i.e., a broadcast station).
To assess whether a voting stock interest in a direct or indirect parent corporation of a broadcast licensee is attributable, the FCC uses a “multiplier” analysis in which non-controlling voting stock interests are deemed proportionally reduced at each non-controlling link in a multi-corporation ownership chain.
Ownership-rule conflicts could require divestitures by either the Company or the affected shareholders, officers or directors. Such conflicts could also result in the Company being unable to obtain FCC consents necessary for future acquisitions. Conversely, the Company’s media interests could operate to restrict other media investments by shareholders having or acquiring an interest in the Company.
Local Radio Ownership:
The local radio ownership rule limits the number of commercial radio stations in a radio market in which a person or entity may hold an attributable interest based on the number of radio stations in that market:
•if the market has 45 or more radio stations, one entity may own up to eight stations, not more than five of which may be in the same service (AM or FM);
•if the market has between 30 and 44 radio stations, one entity may own up to seven stations, not more than four of which may be in the same service;
•if the market has between 15 and 29 radio stations, one entity may own up to six stations, not more than four of which may be in the same service; and
•if the market has 14 or fewer radio stations, one entity may own up to five stations, not more than three of which may be in the same service, however one entity may not own more than 50% of the stations in the market.
The New York radio market has more than 45 radio stations.
For purposes of applying these numerical limits, the FCC has adopted rules with respect to (i) so-called local marketing agreements, or “LMAs,” by which the licensee of one radio station provides programming for another licensee’s radio station in the same market and sells all of the advertising within that programming and (ii) so-called joint sale agreements, or “JSAs,” by which the licensee of one station sells the advertising time on another station in the market. Under these rules, an entity that owns one or more radio stations in a market and programs more than 15% of the broadcast time, or sells more than 15% of the advertising time, on another radio station in the same market pursuant to an LMA or JSA is generally required to count the station toward its media ownership limits even though it does not own the station. As a result, in a market where we own one or more radio stations, we generally cannot provide programming to another station under an LMA, or sell advertising on another station pursuant to a JSA, if we could not acquire that station under the local radio ownership rule.
In the 2018 and 2022 quadrennial review proceedings, the FCC is considering all aspects of the local radio ownership rule, including whether the rule in its current form remains necessary in the public interest.
Alien Ownership:
Alien Ownership: Under the Communications Act, no FCC license may be held by a corporation if more than one-fifth of its capital stock is owned or voted by aliens or their representatives, a foreign government or representative thereof, or an entity organized under the laws of a foreign country (collectively, “Non-U.S. Persons”). Furthermore, the Communications Act provides that no FCC license may be granted to an entity directly or indirectly controlled by another entity of which more than one-fourth of its capital stock is owned or voted by Non-U.S. Persons if the FCC finds that the public interest will be served by the denial of such license. The FCC has adopted rules to simplify and streamline the process for requesting authority to exceed the 25% indirect foreign ownership limit in broadcast licensees and has revised the methodology that publicly traded broadcasters must use to assess their compliance with the foreign ownership restrictions. The foregoing restrictions on alien ownership apply in modified form to other types of business organizations, including partnerships and limited liability companies. Our Amended and Restated Articles of Incorporation and Amended and Restated Code of By-Laws authorize the Board of Directors to prohibit such restricted alien ownership, voting or transfer of capital stock as would cause the Company to violate the Communications Act or FCC regulations.
Assignments and Transfers of Control
The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors, including compliance with the various rules limiting common ownership of media properties, the “character” of the assignee or transferee and those persons holding attributable interests therein and compliance with the Communications Act’s limitations on alien ownership as well as other statutory and regulatory requirements. When evaluating an assignment or transfer of control application, the FCC is prohibited from considering whether the public interest might be served by an assignment of the broadcast license or transfer of control of the licensee to a party other than the assignee or transferee specified in the application.
Programming and Operations
The Communications Act requires broadcasters to serve the “public interest.” Beginning in the late 1970s, the FCC gradually relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station’s community of license. However, licensees are still required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness.
Federal law prohibits the broadcast of obscene material at any time and the broadcast of indecent material during specified time periods. Federal law also imposes sponsorship identification (or “payola”) requirements, which mandate the disclosure of information concerning programming the airing of which is paid for by third parties. The company may receive letters of inquiry or other notifications concerning alleged violations of the FCC’s rules at its stations. We cannot predict the outcome of any complaint proceeding or investigation or the extent or nature of any future FCC enforcement action.
Stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identification, equal employment opportunities, contest promotions, and technical operations, including limits on radio frequency radiation.
Failure to observe FCC rules and policies can result in the imposition of various sanctions, including monetary fines, the grant of “short-term” (less than the maximum term) license renewals or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license.
Additional Developments and Proposed Changes
The FCC has adopted rules implementing a low power FM (“LPFM”) service, and over 2000 such stations have been licensed. In November 2007, the FCC adopted rules that, among other things, enhance LPFM’s interference protection from subsequently-authorized full-service stations. Congress then passed legislation eliminating certain minimum distance separation requirements between full-power and LPFM stations, thereby reducing the interference protection afforded to full-power FM stations. As required by the legislation, the FCC in January 2012 submitted a report to Congress indicating that the results of a statutorily mandated economic study indicated that, on the whole, LPFM stations do not currently have, and in the future are unlikely to have, a demonstrable economic impact on full-service commercial FM radio stations. The FCC has since modified its rules to permit the processing of additional LPFM applications and to implement the legislative requirements regarding interference protection, and has accepted applications seeking authority to construct or make major changes to LPFM facilities. Although to date there have been very few, if any, instances of LPFM stations interfering with full-power radio stations, we cannot predict whether any LPFM stations will actually interfere with the coverage of our radio stations in the future.
The FCC also previously authorized the launch and operation of a satellite digital audio radio service (“SDARS”) system. The country’s single SDARS operator, Sirius XM, provides nationwide programming service as well as channels that provide local traffic and weather information for major cities.
In addition, the FCC permits terrestrial digital audio broadcasting (“DAB,” also known as high definition radio or “HD Radio®”) by FM stations, and in October 2020, adopted rules permitting all-digital operations by AM stations.
In order to broadcast musical compositions or to stream them over the Internet, we must pay royalties to copyright owners of musical compositions (typically, songwriters and publishers). These copyright owners often rely on organizations known as performing rights organizations, which negotiate licenses with copyright users for the public performance of their compositions, collect royalties, and distribute them to copyright owners. The three major performing rights organizations, from which the Company has licenses and to which we pay royalties, are the American Society of Composers, Authors, and Publishers (“ASCAP”), Broadcast Music, Inc. (“BMI”), and SESAC, Inc. These rates are set periodically, are often negotiated by organizations acting on behalf of broadcasters, and may increase in the future. It also is possible that songwriters or publishers may disassociate with these performing rights organizations, or that additional such organizations could emerge in the future. In 2013 a new performing rights organization named Global Music Rights (“GMR”) was formed. GMR has obtained the rights to certain high-value copyrights and has negotiated individual licensing agreements with radio stations for songs within its repertoire. If a significant number of musical composition copyright owners withdraw from the established performing rights organizations, if new performing rights organizations form to license compositions that are not already licensed, or if the consent decrees between the DOJ and ASCAP/BMI are materially modified or eliminated, our royalty rates or negotiation costs could increase.
In order to stream music over the Internet, MediaCo must also obtain licenses and pay royalties to the owners of copyrights in sound recordings (typically, artists and record companies). These royalties are in addition to royalties for Internet streaming that must be paid to performance rights organizations.
Legislation also has regularly been introduced in Congress that would require the payment of performance royalties to artists, musicians, or record companies whose music is played on terrestrial radio stations, ending a long-standing copyright law exception. If enacted, such legislation could have an adverse impact on the cost of music programming.
Congress and the FCC also have under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of additional matters that could, directly or indirectly, affect the operation, ownership and profitability of our broadcast stations, result in the loss of audience share and advertising revenues for our broadcast stations and/or affect our ability to acquire additional broadcast stations or finance such acquisitions. Such matters include, but are not limited to:
•proposals to impose spectrum use or other fees on FCC licensees;
•proposals to repeal or modify some or all of the FCC’s multiple ownership rules and/or policies;
•proposals to impose requirements intended to promote broadcasters’ service to their local communities;
•proposals to change rules relating to political broadcasting;
•technical and frequency allocation matters;
•proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages;
•proposals to tighten safety guidelines relating to radio frequency radiation exposure;
•proposals to modify broadcasters’ public interest obligations; and
•proposals, including by states, to limit the tax deductibility of advertising expenses by advertisers.
We cannot predict whether any proposed changes will be adopted, what other matters might be considered in the future, or what impact, if any, the implementation of any of these proposals or changes might have on our business.
The foregoing is only a brief summary of certain provisions of the Communications Act and of specific FCC regulations. Reference should be made to the Communications Act as well as FCC regulations, public notices and rulings for further information concerning the nature and extent of federal regulation of broadcast stations.
ITEM 1A. RISK FACTORS.
The risk factors listed below, in addition to those set forth elsewhere in this report, could affect the business, financial condition and future results of the Company. Additional risks and uncertainties that are not currently known to the Company or that are not currently believed by the Company to be material may also harm the Company’s business, financial condition and results of operations.
Risks Related to our Business
Our results of operations could be negatively impacted by weak economic conditions and instability in financial markets.
We believe that advertising is a discretionary business expense. Spending on advertising tends to decline disproportionately during an economic recession or downturn as compared to other types of business spending. Consequently, weakness in the United States economy generally has an adverse effect on our advertising revenue and, therefore, our results of operations.For example, the economic tumult caused by the COVID-19 pandemic has had a material adverse effect on our advertising revenues at our New York radio stations.
Even in the absence of a general recession or downturn in the economy, an individual business sector (such as the automotive industry) that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn. If that sector’s spending represents a significant portion of our advertising revenues, any reduction in its advertising expenditures may affect our revenue.
Radio revenues in the market in which we operate have been challenged and may remain so.
Radio revenues in the New York market in which we operate are highly correlated to the performance of the economy of United States. New York market revenues, as measured by the accounting firm Miller Kaplan Arase LLP (“Miller Kaplan”), during the year ended December 31, 2022, and the year ended December 31, 2021, were up 1.6% and up 41.2%, respectively. During these same periods, the U.S. Bureau of Economic Analysis reports that U.S. real gross domestic product grew 2.1% and 5.9%, respectively.
We may lose audience share and advertising revenue to competing radio stations or other types of media.
The radio broadcasting industry is highly competitive. Our radio stations compete for audiences and advertising revenue with other radio stations and station groups, as well as with other media. Shifts in population, demographics, audience tastes, consumer use of technology and forms of media and other factors beyond our control could cause us to lose market share. Any adverse change in our radio stations’ market, or adverse change in the relative market positions of our stations, could have a material adverse effect on our revenue or ratings, could require increased promotion or other expenses in that market, and could adversely affect our revenue. Other radio broadcasting companies may enter the market in which we operate or markets in which we may operate in the future. These companies may be larger and have more financial resources than we have. Our radio stations may not be able to maintain or increase their current audience ratings and advertising revenue in the face of such competition.
MediaCo expects to continue to routinely conduct market research to review the competitive position of our stations in the market. If we determine that a station could improve its operating performance by serving a different demographic, we may change the format of that station. Our competitors may respond to our actions by more aggressive promotions of their stations or by replacing the format we vacate, limiting our options if we do not achieve expected results with our new format.
From time to time, other stations may change their format or programming, a new station may adopt a format to compete directly with our stations for audiences and advertisers, or stations might engage in aggressive promotional campaigns. These tactics could result in lower ratings and advertising revenue or increased promotion and other expenses and, consequently, lower earnings and cash flow for us. Any failure by us to respond, or to respond as quickly as our competitors, could also have an adverse effect on our business and financial performance.
Because of the competitive factors we face, we cannot assure investors that we will be able to maintain or increase our current audience ratings and advertising revenue.
Our radio operations are entirely concentrated in the New York market.
Our radio operations are located exclusively in the New York City Metro area. Since our radio stations’ revenues are concentrated in this market, an economic downturn, increased competition or another significant negative event in the New York City market could reduce our revenues more dramatically than other companies that do not depend as much on this market, which could have a material and adverse effect on our financial condition and results of operations.
Our radio operations lack the scale of some of our competitors.
MediaCo's only radio stations are two stations in New York. Some of our competitors in this market have larger clusters of radio stations. Our competitors may be able to leverage their market share to extract a greater percentage of available advertising revenues in this market and may be able to realize operating efficiencies by programming multiple stations in the market. Also, given our reliance on urban formats in New York, our financial condition and results of operations could be materially and adversely affected by additional urban format competition by our competitors.
Our operations have been, and continue to be, adversely affected by the pandemic.
We hold a number of events, most notably Summer Jam in June of each year, in which large numbers of people are in close proximity. We were required to cancel Summer Jam in 2020 due to the COVID-19 pandemic, which adversely impacted our financial results in 2020. We delayed Summer Jam in 2021 until late August due to slower than expected reopening of the New York/New Jersey market. In 2022, Summer Jam was moved back to June, however the ticket sales and advertising were negatively impacted by a combination of the pandemic, weather forecast and the suppressed market conditions, resulting in a loss in revenue. Our ability to successfully hold future Summer Jams is dependent on, among other things, state and local restrictions on crowd sizes and people’s willingness to attend large gatherings. We cannot predict when, if ever, advertising levels will return to pre-pandemic levels.
Summer Jam is highly sensitive to public tastes and is dependent on our ability to secure popular artists, and our ticketing revenue can be impacted by changes in consumer preferences.
Our business is highly sensitive to rapidly changing public tastes and is dependent on the availability of popular artists and events. Summer Jam depends in part on our ability to anticipate the tastes of consumers and to offer events that appeal to them. Since we rely on unrelated parties to create and perform at live music events, any unwillingness or lack of availability of popular artists could limit our ability to generate revenue. In particular, there are a limited number of artists that can headline or who can sell out larger venues, which we rent. Accordingly, our ticket sales success depends, in part, upon the ability of these third parties to correctly anticipate public demand for particular events, as well as the availability of popular artists, entertainers and teams.
In addition, artists are booked four to eight months in advance of the beginning of the tour and we often agree to pay an artist a fixed guaranteed amount prior to our receiving any revenue. Therefore, if the public is not receptive, or an artist cancels, we may incur a loss depending on the amount of the fixed guarantee or incurred costs relative to any revenue earned, as well as revenue we could have earned at booked venues. Furthermore, consumer preferences change from time to time, and our failure to anticipate, identify or react to these changes could result in reduced demand for our services, which would adversely affect our business, financial condition and results of operations.
We are a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. Investors in our Class A common stock will not have the same protections afforded to shareholders of companies that are subject to such requirements.
As of December 31, 2022, SG Broadcasting controlled approximately72.4% of the outstanding voting interests of MediaCo through its ownership of MediaCo Class B common stock. Because of the voting power of SG Broadcasting, we are considered a “controlled company” for purposes of Nasdaq requirements. As such, we are exempt from certain corporate governance requirements of Nasdaq, including the requirements that:
•a majority of the board of directors consist of independent directors,
•we have a Nominating and Corporate Governance Committee that is composed entirely of independent directors, and
•we have a Compensation Committee that is composed entirely of independent directors.
Currently, MediaCo does have a majority of independent directors and the Compensation Committee does consist entirely of independent directors; however, we do not have a Nominating and Corporate Governance Committee. MediaCo could choose to take advantage of the exemptions relating to the board and the Compensation Committee. Accordingly, investors in our Class A common stock would not have the same protections afforded to shareholders of companies that are subject to all of Nasdaq's corporate governance requirements.
We must respond to the rapid changes in technology, services and standards that characterize the radio broadcasting industry in order to remain competitive, and changes in technology may increase the risk of material intellectual property infringement claims.
The radio broadcasting industry is subject to rapid technological changes, evolving industry standards and the emergence of competition from new technologies and services. We cannot assure that we will have the resources to acquire new technologies or to introduce new services that could compete with these new technologies. Various media technologies and services that have been developed or introduced include:
•satellite-delivered digital audio radio service, which has resulted in subscriber-based satellite radio services with numerous niche formats;
•audio programming by cable systems, direct-broadcast satellite systems, Internet content providers and other digital audio broadcast formats, including podcasts;
•personal digital audio devices;
•HD Radio®, which provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services; and
•low-power FM radio, which could result in additional FM radio broadcast outlets.
New media has resulted in fragmentation in the radio broadcasting advertising market, but we cannot predict the impact that additional competition arising from new technologies may have on the radio broadcasting industry or on our financial condition and results of operations.
A number of automakers are introducing more advanced, interactive dashboard technology including the introduction of technologies like Apple CarPlay and Google Android Auto that enable vehicle entertainment systems to more easily interface with a consumer’s smartphone and include alternative audio entertainment options.
Programmatic buying, which enables an advertiser to purchase advertising inventory through an exchange or other service and bypass the traditional personal sales relationship, has become widely adopted in the purchase of digital advertising and is an emerging trend in the radio industry. We cannot predict the impact programmatic buying may have on the radio industry or our financial condition and results of operations.
Additionally, technological advancements in the operation of radio stations and related businesses have increased the number of patent and other intellectual property infringement claims brought against broadcasters, including MediaCo. While MediaCo has not historically been subject to material patent and other intellectual property claims and takes certain steps to limit the likelihood of, and exposure to, such claims, no assurance can be given that material claims will not be asserted in the future.
Our business depends heavily on maintaining our licenses with the FCC. We could be prevented from operating a radio station if we fail to maintain its license.
The radio broadcasting industry is subject to extensive and changing regulation. The Communications Act and FCC rules and policies require FCC approval for transfers of control and assignments of FCC licenses. The filing of petitions or complaints against FCC licensees could result in the FCC delaying the grant of, or refusing to grant, its consent to the assignment of licenses to or from an FCC licensee or the transfer of control of an FCC licensee. In certain circumstances, the Communications Act and FCC rules and policies will operate to impose limitations on alien ownership and voting of our common stock. There can be no assurance that there will not be changes in the current regulatory scheme, imposition of additional regulations, or the creation of new regulatory agencies, which changes could restrict or curtail our ability to acquire, operate and dispose of stations or, in general, to compete profitably with other operators of radio and other media properties.
Each of our radio stations operates pursuant to one or more licenses issued by the FCC. Under FCC rules, radio licenses are granted for a term of eight years. Our licenses were successfully renewed in 2022 through June 2030. While we are not aware of facts or circumstances that would prevent us from having our current licenses renewed in the future, third parties could challenge our renewal applications and there can be no assurance that the licenses will be renewed or that renewals will not include conditions or qualifications that could adversely affect our business and operations. Failure to obtain the renewal of any of our broadcast licenses would likely have a material adverse effect on our business and operations. In addition, if we or any of our officers, directors or significant stockholders materially violates the FCC’s rules and regulations or the Communications Act, is convicted of a felony or is found to have engaged in unlawful anticompetitive conduct or fraud upon a government agency, the FCC may, in response to a petition from a third party or on its own initiative, commence a proceeding to impose sanctions upon us which could involve the imposition of monetary fines, the revocation of our broadcast licenses or other sanctions.
We disseminate large amounts of content to the public. An ill-conceived or mistimed on-air statement or social media post could have a material adverse effect on our business.
The FCC’s rules prohibit the broadcast of obscene material at any time and prohibit indecent material between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition on the broadcast of indecent material because of the FCC’s broad definition of such material, coupled with the spontaneity of live programming.
Congress has dramatically increased the penalties for broadcasting obscene, indecent or profane programming and broadcasters can potentially face license revocation, renewal or qualification proceedings in the event that they broadcast such material. In addition, the FCC’s heightened focus on indecency, against the broadcast industry generally, may encourage third parties to oppose our license renewal applications or applications for consent to acquire broadcast stations. As a result of these developments, we have implemented certain measures that are designed to reduce the risk of broadcasting indecent material in violation of the FCC’s rules. These and other future modifications to our programming in an effort to reduce the risk of indecency violations could have an adverse effect on our competitive position.
Even statements or social media posts that do not violate the FCC’s indecency rules could offend our audiences and advertisers or infringe the rights of third parties, resulting in a decline in ratings, a loss in revenues, a challenge to our broadcast licenses, or extended litigation. While we maintain insurance covering some of these risks, others are effectively uninsurable and could have a material adverse effect on our financial condition and results of operations.
Misalignment with public and consumer taste and preferences could negatively impact advertising demand and profitability of our business.
Our business creates content for our target audiences. Our business relies on an alignment between our brands and our audience taste and preferences through the distribution of content over-the-air, digitally and visually. If the alignment between our brands and our audience shifts, then we might experience a shift in advertising revenue and categories.
Changes in current Federal regulations could adversely affect our business operations
Congress and the FCC have under consideration, and may in the future consider and adopt, new laws, regulations and policies that could, directly or indirectly, affect the profitability of our broadcast stations. In particular, Congress is considering a revocation of radio's exemption from paying royalties to performing artists for use of their recordings (radio already pays a royalty to songwriters). A requirement to pay additional royalties could have a material and adverse effect on our financial condition and results of operations.
Our business strategy and our ability to operate profitably depend on the continued services of our key employees, the loss of whom could have a material adverse effect on our business.
Our success depends in large part upon the leadership and performance of our radio management teams and other key personnel. Operating as an independent public company demands a significant amount of time and effort from our management and other personnel and may give rise to increased turnover. If we lose the services of members of our management team or other key personnel, we may not be able to successfully manage our business or achieve our business objectives.
We need to continue to attract and retain qualified key personnel in a highly competitive environment. Our ability to attract, recruit and retain such talent will depend on a number of factors, including the hiring practices of our competitors, the performance of our developing business programs, our compensation and benefits, and economic conditions affecting our industry generally. Our radio stations' personnel includes several on-air personalities and hosts of syndicated radio programs with large and loyal audiences in their respective broadcast areas. These on-air personalities are sometimes significantly responsible for the ranking of a station and, thus, the ability of the station to sell advertising. Such on-air personalities or other key individuals may not remain with our radio stations and we may not retain their audiences, which could affect our competitive position. If we cannot effectively hire and retain qualified employees, our business, prospects, financial condition and results of operations could suffer.
Impairment losses related to our intangible assets could reduce our earnings in the future.
As of December 31, 2022, our intangible assetscomprised 67% of our total assets. We did not record any impairment charges during the years ended December 31, 2022, and 2021. However, if events occur or circumstances change, the fair value of our intangible assets might fall below the amount reflected on our balance sheet, and we may be required to recognize impairment charges in our statement of operations, which may be material, in future periods.
Our operating results have been and may again be adversely affected by acts of war, a global health crisis, terrorism and natural catastrophes.
Acts of war and terrorism against the United States, and the country’s response to such acts, may negatively affect the U.S. advertising market, which could cause our advertising revenues to decline due to advertising cancellations, delays or defaults in payment for advertising time, and other factors. In addition, these events may have other negative effects on our business, the nature and duration of which we cannot predict.
For example, after the September 11, 2001 terrorist attacks, we decided that the public interest would be best served by the presentation of continuous commercial-free coverage of the unfolding events on our stations. This temporary policy had a material adverse effect on our advertising revenues and operating results for the month of September 2001. Similarly, the COVID-19 pandemic caused severe trauma to our business during 2020, with advertisers pulling advertisements and events like Summer Jam being canceled. Future events like those of September 11, 2001, or the evolving COVID-19 pandemic, may have a material adverse effect on our advertising revenues and operating results.
Additionally, the attacks on the World Trade Center on September 11, 2001 resulted in the destruction of the transmitter facilities that were located there. Although we had no transmitter facilities located at the World Trade Center, broadcasters that had facilities located in the destroyed buildings experienced temporary disruptions in their ability to broadcast. Since we tend to locate transmission facilities for stations serving urban areas on tall buildings or other significant structures, such as the Empire State Building in New York, further terrorist attacks or other disasters could cause similar disruptions in our broadcasts in the areas affected. If these disruptions occur, we may not be able to locate adequate replacement facilities in a cost-effective or timely manner or at all. Failure to remedy disruptions caused by terrorist attacks or other disasters and any resulting degradation in signal coverage could have a material adverse effect on our business and results of operations.
Similarly, hurricanes, floods, tornadoes, earthquakes, wild fires and other natural disasters can have a material adverse effect on our operations in any given market. While we generally carry insurance covering such catastrophes, we cannot be sure that the proceeds from such insurance will be sufficient to offset the costs of rebuilding or repairing our property or the lost income.
Our business is dependent upon the proper functioning of our internal business processes and information systems. The modification, change of, or interruption of such systems may disrupt our business, processes and internal controls.
The proper functioning of our internal business processes and information systems is critical to the efficient operation and management of our business. If these information technology systems fail or are interrupted, our operations may be adversely affected and operating results could be harmed. Our business processes and information systems need to be sufficiently scalable to adapt to the size of our business and may require modifications or upgrades that expose us to a number of operational risks. Our information technology systems, and those of third party providers, may also be vulnerable to damage or disruption caused by circumstances beyond our control. These include catastrophic events, power anomalies or outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic intrusions, unauthorized access and cyber-attacks. Any material disruption, malfunction or similar challenges with our business processes or information systems, or disruptions or challenges relating to the transition to new processes, systems or providers, could have a material adverse effect on our financial condition and results of operations.
We may not be successful in identifying any additional suitable acquisition or investment opportunities.
As part of our business strategy, we may pursue acquisitions or other investment opportunities. However, there is no assurance that we will be successful in identifying or consummating any suitable acquisitions and certain acquisition opportunities may be limited or prohibited by applicable regulatory regimes. Even if we do complete acquisitions or business combinations, there is no assurance that any of them will be of value in enhancing our business or our financial condition. In addition, our ongoing activities could divert a substantial amount of our management time and may be difficult for us to integrate, which could adversely affect management's ability to identify and consummate other investment opportunities. The failure to identify or successfully integrate future acquisitions and investment opportunities could have a material adverse effect on our results of operations and financial condition.
Because we face significant competition for acquisition and investment opportunities, it may be difficult for us to fully execute our business strategy. We expect to encounter intense competition for acquisition and investment opportunities from both strategic investors and other potential competitors, such as private investors (which may be individuals or investment partnerships), blank check companies, and other entities, domestic and international, competing for the type of businesses that we may intend to acquire. Many of these competitors possess greater technical, human and other resources, or more local industry knowledge, or greater access to capital, than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. These factors may place us at a competitive disadvantage in successfully completing future acquisitions and investments.
In addition, while we believe that there are numerous target businesses that we could potentially acquire or invest in, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing acquisition and investment opportunities.
Future acquisitions or investments could involve unknown risks that could harm our business and adversely affect our financial condition.
We may make acquisitions in a variety of industries and market sectors. Future acquisitions that we consummate will involve unknown risks, some of which will be particular to the industry in which the acquisition target operates. We may be unable to adequately address the financial, legal and operational risks raised by such acquisitions, especially if we are unfamiliar with the industry in which we invest. The realization of any unknown risks could prevent or limit us from realizing the projected benefits of the acquisitions, which could adversely affect our financial condition and liquidity. In addition, our financial condition and results of operations will be subject to the specific risks applicable to any company in which we invest.
Risks Related to Indebtedness:
The terms of any future indebtedness may restrict our current and future operations, particularly our ability to respond to changes in market conditions or to take some actions.
Any future long-term debt instruments may impose significant operating and financial restrictions on us. These restrictions will likely significantly limit or prohibit, among other things, our ability to incur additional indebtedness, pay dividends on securities, incur liens, enter into asset purchase or sale transactions, merge or consolidate with another company, dispose of our assets or make certain other payments or investments.
These restrictions may limit our ability to grow our business through acquisitions and could limit our ability to respond to market conditions or meet extraordinary capital needs. They also could restrict our corporate activities in other ways and could adversely affect our ability to finance our future operations or capital needs.
To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our November 25, 2019 convertible promissory note payable to Emmis Communications Corporation (the “Emmis Convertible Promissory Note”) is paid in-kind (“PIK”), but any future long-term debt agreements will likely require us to pay periodic interest and principal payments during the term of such indebtedness. Our ability to make payments on indebtedness and to fund capital expenditures will depend on our ability to generate cash in the future. This ability to generate cash, to a certain extent, will be subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Our businesses might not generate sufficient cash flow from operations. We might not be able to complete future offerings, and future borrowings might not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.
Risks Related to our Common Stock:
SG Broadcasting possesses significant voting interest with respect to our outstanding common stock, which limits the influence on corporate matters by a holder of MediaCo Class A common stock.
As of December 31, 2022,SG Broadcasting held approximately 82.1% of the voting interests of our outstanding common stock on a fully diluted basis. Accordingly, SG Broadcasting has the ability to significantly influence our management and affairs through the election and removal of our board of directors and all other matters requiring shareholder approval unless a separate vote of the MediaCo Class A common stock is required by our articles of incorporation or Indiana law, including any future merger, consolidation or sale of all or substantially all of our assets. This concentrated voting interest could also discourage others from initiating any potential merger, takeover or other change-of-control transaction that may otherwise be beneficial to our shareholders. Furthermore, this concentrated control limits the practical effect of the influence by holders of MediaCo Class A common stock over our business and affairs, through any shareholder vote or otherwise. Accordingly, the effects of any of the above could depress the price of MediaCo Class A common stock.
Standard General’s and Emmis’ interests may conflict with those of other shareholders.
SG Broadcasting, a company wholly owned by funds managed by Standard General, beneficially owns shares representing approximately 76.8% of the outstanding combined voting power of all classes of our common stock. Therefore, SG Broadcasting is in a position to exercise substantial influence over the outcome of most matters submitted to a vote of our shareholders, including the election of a majority of our directors, the determination to engage in a merger, acquisition or disposition of a material amount of assets, or otherwise.
Additionally, other than with respect to the Emmis Convertible Promissory Note, which is convertible into MediaCo Class A common stock, Emmis no longer holds any common stock of MediaCo, though its officers serve as the MediaCo Class A Directors. These officers were initially shareholders of MediaCo, but no assurance can be given that they have or will retain their ownership of MediaCo shares. Further, so long as amounts remain outstanding under the Emmis Convertible Promissory Note, MediaCo's board of directors is obligated to nominate as MediaCo Class A Directors only persons specified by Emmis. Under Indiana law, directors of MediaCo may, in considering the best interests of the Company, consider the effects of any action on shareholders, employees, suppliers, and customers of the Company, and communities in which offices or other facilities of the Company are located, and any other factors the directors consider pertinent.
MediaCo Class A common stock may cease to be listed on Nasdaq.
MediaCo’s Class A common stock is listed on Nasdaq under the ticker symbol “MDIA”. We may not be able to meet the continued listing requirements of Nasdaq, which require, among other things, a minimum closing price of MediaCo Class A common stock, a minimum market capitalization and minimum shareholders' equity. If we are unable to satisfy the requirements of Nasdaq for continued listing, MediaCo Class A common stock would be subject to delisting from that market, and we might or might not be eligible to list our shares on another market.
A delisting of MediaCo Class A common stock from Nasdaq could negatively impact us by, among other things, reducing the liquidity and market price of MediaCo Class A common stock. There can be no assurance that we will be able to comply with Nasdaq's continued listing requirements.
Our By-Laws designate the Circuit or Superior Courts of Marion County, Indiana, or the United States District Court for the Southern District of Indiana in a case of pendant jurisdiction, as the exclusive forum for certain litigation that may be initiated by holders of shares of MediaCo, which would discourage lawsuits against us and our director and officers.
Pursuant to our By-laws, to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, the Circuit or any Superior Court of Marion County Indiana, or the United States District Court for the Southern District of Indiana in a case of pendent jurisdiction, shall be the sole and exclusive forum for:
•any derivative action or proceeding brought on behalf of the Company,
•any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of MediaCo to the Company or the holders of shares of MediaCo,
•any action asserting a claim arising pursuant to any provision of the Indiana Business Corporation Law (the “IBCL”), the Articles of Incorporation or the By-laws, or
•any action asserting a claim governed by the internal affairs doctrine, in each case subject to said court having personal jurisdiction over the indispensable parties named as defendants.
Though Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations under it, the Company intends for this forum selection provision to apply to the fullest extent permitted by law, including to actions or claims arising under the Securities Act. While holders of shares of MediaCo cannot waive compliance with the federal securities laws and the rules and regulations under it, and therefore the forum selection provision does not apply to claims arising under the Exchange Act or the rules and regulations under it, this forum selection provision may limit the ability of holders of shares of MediaCo to bring a claim arising in other instances in a judicial forum that they find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against the Company and/or our directors and officers. Alternatively, if a court outside of the State of Indiana were to find this forum selection provision inapplicable to, or unenforceable in respect of, one or more of the types of actions or claims described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could harm our business, prospects, financial condition and results of operations.
We are an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, MediaCo Class A common stock may be less attractive to investors for so long as we remain an emerging growth company.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are afforded to emerging growth companies, including, but not limited to, exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find MediaCo Class A common stock less attractive because we intend to rely on these exemptions. If some investors find MediaCo Class A common stock less attractive as a result, there may be a less active trading market for MediaCo Class A common stock and its stock price may be lower or more volatile as a result. We may take advantage of these exemptions until we no longer qualify as an emerging growth company.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
The types of properties required to support our radio stations include offices, studios and transmitter/antenna sites. We lease our studio and office spaces. Our stations' studios and principal executive offices are housed within its offices in Manhattan. We generally consider our facilities to be suitable and of adequate size for our current and intended purposes. We lease primary and backup transmitter/antenna sites for WQHT and WBLS in Manhattan. With regard to WBLS, we lease an additional backup transmitter/antenna site in Lyndhurst, New Jersey from WLIB Tower LLC, an Indiana corporation and subsidiary of Emmis (“WLIB”) pursuant to a transmitter/antenna site lease. The transmitter/antenna site lease is for an initial term of 20 years, with two automatic renewal periods of 10 years each, unless MediaCo provides notice to WLIB of its intention to not renew the lease for an additional term. The transmitter/antenna site for each station is generally located so as to provide maximum market coverage, consistent with the station's FCC license. In general, we do not anticipate difficulties in renewing the transmitter/antenna site leases or in leasing additional space or sites if required.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any material legal proceedings at this time. From time to time, we may be subject to various legal proceedings and claims, which may have a material adverse effect on our financial position or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information for our Common Stock
MediaCo’s Class A common stock is quoted on the Nasdaq Capital Market under the symbol MDIA. There is no established public trading market for MediaCo’ Class B common stock or Series A convertible preferred stock.
Holders
At March 24, 2023, there were 243 stockholders of record of the Class A common stock, and there was one stockholder of record of the Class B common stock. These figures do not include an estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies.
Dividends
MediaCo currently intends to retain future earnings for use in its business and has no plans to pay any dividends on shares of its common stock in the foreseeable future.
Share Repurchases
The following table provides information relating to the shares we purchased during the quarter ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased | | Weighted Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Program | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program |
October 1, 2022 –
October 31, 2022 | | — | | | — | | | — | | | — | |
November 1, 2022 –
November 30, 2022 | | — | | | — | | | — | | | — | |
December 1, 2022 –
December 31, 2022 | | 187,078 | | | $ | 1.17 | | | 187,078 | | | $ | 1,777,705 | |
| Total | | 187,078 | | | $ | 1.17 | | | 187,078 | | | |
ITEM 6. [RESERVED]
None.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
GENERAL
The following discussion pertains to MediaCo Holding Inc. and its subsidiaries (collectively, “MediaCo” or the “Company”).
On December 9, 2022, Fairway Outdoor LLC, FMG Kentucky, LLC and FMG Valdosta, LLC (collectively, "Fairway”), all of which are wholly owned direct and indirect subsidiaries of MediaCo, entered into an Asset Purchase Agreement (the “Purchase Agreement”), with The Lamar Company, L.L.C., a Louisiana limited liability company (the “Purchaser”). The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement. The purchase price was $78.6 million, subject to certain customary adjustments, paid at closing in cash. The sale resulted in a pre-tax gain of $46.9 million in the fourth quarter of 2022.
We have classified the related assets and liabilities associated with our Fairway business as discontinued operations in our consolidated balance sheets and the results of our Fairway business have been presented as discontinued operations in our consolidated statements of income for all periods presented through December 9, 2022 as the sale represented a strategic shift in our business that had a major effect on our operations and financial results. Unless otherwise noted, discussion in management's discussion and analysis refers to the Company's continuing operations. See Note 2 — Discontinued Operations in our consolidated financial statements included elsewhere in this report for additional information.
We own and operate two radio stations located in New York City. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales are the primary component of our consolidated revenues. These rates are in large part based on our radio stations’ ability to attract audiences in demographic groups targeted by their advertisers. The Nielsen Company generally measures radio station ratings weekly for markets measured by the Portable People Meter™, which includes both of our radio stations. Because audience ratings in a radio station’s local market are critical to the station’s financial success, our strategy is to use market research, advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.
Our revenues vary throughout the year. Revenue and operating income are usually lowest in the first calendar quarter, partly because retailers cut back their advertising spending immediately following the holiday shopping season.
In addition to the sale of advertising time for cash, stations typically exchange advertising time for goods or services, which can be used by the station in its business operations. These barter transactions are recorded at the estimated fair value of the product or service received. We generally confine the use of such trade transactions to promotional items or services for which we would otherwise have paid cash. In addition, it is our general policy not to preempt advertising spots paid for in cash with advertising spots paid for in trade.
The following table summarizes the sources of our revenues for the years ended December 31, 2022, and 2021. The category “Nontraditional” principally consists of ticket sales and sponsorships of events our stations conduct in their local markets. The category “Other” includes, among other items, revenues related to network revenues and barter.
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Net revenues: | | | | | | | |
| Radio Advertising | $ | 25,790 | | | 66.8 | % | | $ | 30,012 | | | 71.9 | % |
| Nontraditional | 3,973 | | | 10.3 | % | | 4,864 | | | 11.7 | % |
| Digital | 4,713 | | | 12.2 | % | | 2,864 | | | 6.9 | % |
| Other | 4,119 | | | 10.7 | % | | 3,987 | | | 9.5 | % |
| Total net revenues | $ | 38,595 | | | | | $ | 41,727 | | | |
Roughly 20% of our expenses varies in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions and bad debt. Our costs that do not vary as much in relation to revenue are mostly in our programming and general and administrative departments, such as talent costs, rating fees, rents, utilities and salaries. Lastly, our costs that are highly discretionary are costs in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience and market share.
KNOWN TRENDS AND UNCERTAINTIES
The U.S. radio industry is a mature industry and its growth rate has stalled. Management believes this is principally the result of two factors: (i) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, have gained advertising share against radio and other traditional media and created a proliferation of advertising inventory and (ii) the fragmentation of the radio audience and time spent listening caused by satellite radio, audio streaming services and podcasts has led some investors and advertisers to conclude that the effectiveness of radio advertising has diminished.
Along with the rest of the radio industry, our stations have deployed HD Radio®. HD Radio offers listeners advantages over standard analog broadcasts, including improved sound quality and additional digital channels. In addition to offering secondary channels, the HD Radio spectrum allows broadcasters to transmit other forms of data. We are participating in a joint venture with other broadcasters to provide the bandwidth that a third party uses to transmit location-based data to hand-held and in-car navigation devices. The number of radio receivers incorporating HD Radio has increased in the past year, particularly in new automobiles. It is unclear what impact HD Radio will have on the markets in which we operate.
Our stations have also aggressively worked to harness the power of broadband and mobile media distribution in the development of emerging business opportunities by developing highly interactive websites with content that engages our listeners, deploying mobile applications and streaming our content, and harnessing the power of digital video on our websites and YouTube channels.
The results of our broadcast radio operations are solely dependent on the results of our stations in the New York market. Some of our competitors that operate larger station clusters in the New York market are able to leverage their market share to extract a greater percentage of available advertising revenue through packaging a variety of advertising inventory at discounted unit rates. Market revenues in New York as measured by Miller Kaplan Arase LLP (“Miller Kaplan”), an independent public accounting firm used by the radio industry to compile revenue information, were up 1.6% for the year ended December 31, 2022, and up 41.2% for the year ended December 31, 2021, as compared to the same periods of the prior year. During these periods, revenues for our New York cluster were down 8.5% and up 62.2%, respectively. The decreases for our New York Cluster were largely driven by lower healthcare spend, which our stations benefited from more than those serving the general population in the prior year due to the targeted nature of the awareness campaigns.
As part of our business strategy, we continually evaluate potential acquisitions of businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. We also regularly review our portfolio of assets and may opportunistically dispose of or otherwise monetize assets when we believe it is appropriate to do so.
Throughout 2021 and 2022, with the increased availability of vaccines, the U.S. experienced an easing of restrictions on travel as well as social gatherings and business activities. However, the lingering pandemic impact has caused increases in inflation and general economic disruption. If apprehension persists around interest rate volatility, supply chain disruptions, and COVID-19, consumer spending may be adversely impacted, causing certain advertising categories (e.g., automotive dealers) to advertise less, we expect that our results of operations, financial condition and cash flows will continue to be negatively affected, the extent to which is difficult to estimate at this time.
MediaCo has been impacted by the rising interest rate environment in the financial markets, driving the interest paid on the Senior Credit Facility to increase as well as increasing the cost of any potential future borrowings. At this time, we do not anticipate LIBOR rates to decline.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially derive materially different results under different assumptions and conditions. We believe that our critical accounting policies are those described below.
FCC Licenses
As of December 31, 2022, we have recorded approximately $63.3 million for FCC licenses, which represents approximately 65% of our total assets. We would not be able to operate our radio stations without the related FCC license for each property. FCC broadcast licenses are renewed every eight years; consequently, we continually monitor our stations’ compliance with the various regulatory requirements. Historically, each of our FCC licenses has been renewed at the end of its respective period, and we expect that each FCC license will continue to be renewed in the future. We consider our FCC licenses to be indefinite-lived intangibles.
We do not amortize indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by Accounting Standards Codification (“ASC”) Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting if they are not being operated under a Local Marketing Agreement by another broadcaster. Consequently, our two radio stations in New York are considered a single unit of accounting.
For the years ended December 31, 2022, and 2021, we completed our annual impairment tests on October 1 of each year and will continue to perform our assessments on this date in future years.
Valuation of Indefinite-lived Broadcasting Licenses
Fair value of our FCC licenses is estimated to be the stick value that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company considers both income and market valuation methods when it performs its impairment tests. Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its respective market at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in the unit of accounting’s market remains unchanged, with the exception that the unit of accounting commenced operations at the beginning of the valuation period. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license. Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. The projections incorporated into our license valuations take then current economic conditions into consideration. Under the market method, the Company uses recent sales of comparable radio stations for which the sales value appeared to be concentrated entirely in the value of the license, to arrive at an indication of fair value.
Below are some of the key assumptions used in our income method annual impairment assessments. Long-term growth rates in the New York market in which we operate are based on recent industry trends and our expectations for the market going forward.
| | | | | | | | | | | |
| October 1, 2022 | | October 1, 2021 |
| Discount Rate | 12.7% | | 12.1% |
| Long-term Revenue Growth Rate | 0.6% | | 1.3% |
| Mature Market Share | 9.8% | | 9.2% |
| Operating Profit Margin | 23.5-29.0% | | 24.2-29.0% |
Deferred Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company’s financial statements or income tax returns. Income taxes are recognized during the year in which the underlying transactions are reflected in the consolidated statements of operations. Deferred taxes are provided for temporary differences between amounts of assets and liabilities recorded for financial reporting purposes as compared to amounts recorded for income tax purposes. After determining the total amount of deferred tax assets, the Company determines whether it is more likely than not that some portion of the deferred tax assets will not be realized.
RESULTS OF OPERATIONS
Year ended December 31, 2022 compared to year ended December 31, 2021
The following discussion refers to the Company’s continuing operations. See Note 2 — Discontinued Operations in our consolidated financial statements included elsewhere in this report for additional information.
Net revenues:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| | | | | | | |
| Net revenues | $ | 38,595 | | | $ | 41,727 | | | $ | (3,132) | | | (7.5) | % |
| | | | | | | |
| | | | | | | |
Net radio revenues decreased due to a substantial decline in healthcare spend as COVID-19 vaccination awareness campaigns have slowed, partially offset by stronger tourism advertising spend as restrictions on travel, social gatherings, and business activities have continued to ease. Additionally, revenues from the Summer Jam event were lower in 2022 due to depressed market conditions, in particular as they affected attendance at concerts and festivals.
We typically monitor the performance of our stations against the aggregate performance of the market in which we operate based on reports for the period prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter and syndication arrangements. Miller Kaplan reported gross revenues for the New York radio market increased 1.6% for the year ended December 31, 2022, as compared to the prior year. Our gross revenues reported to Miller Kaplan were down 8.5% for the year ended December 31, 2022, as compared to the prior year.
Operating expenses excluding depreciation and amortization expense:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| | | | | | | |
| Operating expenses excluding depreciation and amortization expense: | $ | 32,847 | | | $ | 28,667 | | | $ | 4,180 | | | 14.6 | % |
| | | | | | | |
| | | | | | | |
Radio operating expenses excluding depreciation and amortization expense increased during the year ended December 31, 2022 due to investment in growing our digital business as well as in our labor force with a higher focus on sales. Additionally, in the prior year, we recorded employee retention credits that reduced operating expenses, which were not available in the current year.
Corporate expenses:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| Corporate expenses | $ | 6,463 | | | $ | 8,434 | | | $ | (1,971) | | | (23.4) | % |
The decrease in corporate expenses for the year ended December 31, 2022 was primarily due to fees from the Emmis Management Agreement that ended in November 2021 and consulting fees incurred in the prior year. These decreases were partially offset by employee retention credits recorded in the prior year that reduced operating expenses, which were not available in the current year.
Depreciation and amortization:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| | | | | | | |
| Depreciation and amortization | $ | 666 | | | $ | 688 | | | $ | (22) | | | (3.2) | % |
| | | | | | | |
| | | | | | | |
Radio depreciation and amortization expense was flat compared to the prior year due to additions in the current year offset by certain assets becoming fully depreciated in the prior year.
Operating income (loss):
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| | | | | | | |
| Operating (loss) income | $ | (1,386) | | | $ | 3,938 | | | $ | (5,324) | | | (135.2) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See “Net revenues,”“Operating expenses excluding depreciation and amortization,” and “Corporate expenses” above.
Interest expense:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| Interest expense | $ | (6,980) | | | $ | (7,707) | | | $ | 727 | | | (9.4) | % |
Interest expense decreased slightly due to the conversion of the SG Broadcasting Promissory Notes (as defined below) in July 2022, which notes were outstanding for all of the prior year, and a lower interest rate after the pay down of the SG Broadcasting Promissory Notes partially offset by accrued interest on the Emmis Convertible Promissory Note being paid in kind in the fourth quarter of 2021, which increased the principal balance for the entirety of the current year.
Provision for income taxes:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| Provision for income taxes | $ | 336 | | | $ | 348 | | | $ | (12) | | | (3.4) | % |
See Note 12 — Income Taxes in our consolidated financial statements included elsewhere in this report.
Consolidated net income (loss):
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Change |
| (Dollars in thousands) | 2022 | | 2021 | | $ | | % |
| Consolidated net income (loss) | $ | 30,914 | | | $ | (6,082) | | | $ | 36,996 | | | (608.3) | % |
The increase in consolidated net income (loss) was due to the gain on sale of Fairway in December 2022, partially offset by lower operating income of continuing operations. See “Net revenues,” “Operating expenses excluding depreciation and amortization,”, “Corporate expenses,” “Interest expense,” and “Provision for income taxes” above and Note 2 — Discontinued Operations in our consolidated financial statements included elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash provided by operations and our At Market Issuance Sales Agreement. Our primary uses of capital have been, and are expected to continue to be, capital expenditures, working capital, and acquisitions.
At December 31, 2022 we had cash, cash equivalents and restricted cash of $15.3 million and net working capital of $15.2 million. At December 31, 2021, we had cash, cash equivalents and restricted cash of $6.1 million and net working capital of $7.7 million. The increase in net working capital is due to an increase in cash and accounts receivable resulting from improved business operations and the sale of Fairway.
At December 31, 2022, we had $6.0 million outstanding to Emmis under the Emmis Convertible Promissory Note, all of which is classified as long-term and has no debt service requirements over the next twelve-month period.
As part of our business strategy, we continually evaluate potential acquisitions of businesses that we believe hold promise for long-term appreciation in value and leverage our strengths.
Operating Activities
Cash provided by continuing operating activities was$2.3 million for the year ended December 31, 2022 compared to cash used in continuing operating activities of $0.6 million for the year ended December 31, 2021. The increase in operating cash flows was mainly attributable to improved collections of accounts receivable.
Investing Activities
Cash provided by continuing investing activities was $77.6 million for the year ended December 31, 2022 primarily attributable to the proceeds from the sale of Fairway, partially offset by capital expenditures. Cash used in investing activities of $0.4 million for the year ended December 31, 2021 was attributable to capital expenditures.
Financing Activities
Cash used in continuing financing activities was $70.1 million for the year ended December 31, 2022, was due to the pay down of outstanding long-term debt of $68.6 million and settlement of tax withholding obligations of $1.3 million.
Cash provided by continuing financing activities was $0.3 million for the year ended December 31, 2021, was due to debt proceeds of $4.0 million and proceeds from the issuance of Class A common stock of $0.3 million, partially offset by debt payments and debt related costs of $3.4 million and settlement of tax withholding obligations of $0.7 million.
SEASONALITY
Our results of operations are usually subject to seasonal fluctuations, which result in higher second quarter revenues and operating income. For our radio operations, this seasonality is largely due to the timing of our largest concert in June of each year. Results are typically lowest in the first calendar quarter.
INFLATION
The impact of inflation on operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse effect on operating results.
OFF-BALANCE SHEET FINANCINGS AND LIABILITIES
Other than legal contingencies incurred in the normal course of business, and contractual commitments to purchase goods and services, all of which are discussed in Note 11 to the consolidated financial statements, which is incorporated by reference herein, the Company does not have any material off-balance sheet financings or liabilities. The Company does not have any majority-owned or controlled subsidiaries that are not included in the consolidated financial statements, nor does the Company have any interests in or relationships with any “special-purpose entities” that are not reflected in the consolidated financial statements or disclosed in the Notes to consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of MediaCo Holding Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MediaCo Holding Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in retained earnings (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2019.
Indianapolis, IN
March 31, 2023
MEDIACO HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | |
| Year ended December 31, |
| (in thousands, except per share amounts) | 2022 | | 2021 |
| NET REVENUES | $ | 38,595 | | | $ | 41,727 | |
| OPERATING EXPENSES: | | | |
| Operating expenses excluding depreciation and amortization expense | 32,847 | | | 28,667 | |
| Corporate expenses | 6,463 | | | 8,434 | |
| Depreciation and amortization | 666 | | | 688 | |
| Loss on disposal of assets | 5 | | | — | |
| Total operating expenses | 39,981 | | | 37,789 | |
| OPERATING (LOSS) INCOME | (1,386) | | | 3,938 | |
| OTHER INCOME (EXPENSE): | | | |
| Interest expense, net | (6,980) | | | (7,707) | |
| Other income | 125 | | | — | |
| Loss on debt extinguishment | (1,218) | | | (81) | |
| Total other expense | (8,073) | | | (7,788) | |
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (9,459) | | | (3,850) | |
| PROVISION FOR INCOME TAXES | 336 | | | 348 | |
| NET LOSS FROM CONTINUING OPERATIONS | (9,795) | | | (4,198) | |
| DISCONTINUED OPERATIONS: | | | |
| Loss from discontinued operations before income taxes | (3,081) | | | (1,874) | |
| Gain on sale of discontinued operations | 46,875 | | | — | |
| Income tax expense from discontinued operations | (3,085) | | | (10) | |
| NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS | 40,709 | | | (1,884) | |
| CONSOLIDATED NET INCOME (LOSS) | 30,914 | | | (6,082) | |
| PREFERRED STOCK DIVIDENDS | 3,330 | | | 2,752 | |
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | 27,584 | | | $ | (8,834) | |
| | | |
| Net income (loss) per share attributable to common shareholders - basic and diluted: | | | |
| Continuing operations | $ | (0.98) | | | $ | (0.96) | |
| Discontinued operations | $ | 3.04 | | | $ | (0.26) | |
| Net income (loss) per share attributable to common shareholders - basic and diluted: | $ | 2.06 | | | $ | (1.22) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Weighted average common shares outstanding: | | | |
| Basic | 13,380 | | | 7,217 | |
| Diluted | 13,380 | | | 7,217 | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MEDIACO HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| (in thousands, except share data) | DECEMBER 31,
2022 | | DECEMBER 31,
2021 |
| ASSETS | | | |
| CURRENT ASSETS: | | | |
| Cash and cash equivalents | $ | 10,925 | | | $ | 6,121 | |
| Restricted cash | 4,376 | | | — | |
| Accounts receivable, net of allowance for doubtful accounts of $122 and $186, respectively | 8,568 | | | 12,196 | |
| Prepaid expenses | 979 | | | 1,164 | |
| Other | 341 | | | 409 | |
| Current assets of discontinued operations | 1,066 | | | 1,751 | |
| Total current assets | 26,255 | | | 21,641 | |
| PROPERTY AND EQUIPMENT: | | | |
| | | |
| Leasehold improvements | 8,474 | | | 8,474 | |
| Broadcasting equipment | 5,786 | | | 5,765 | |
| | | |
| Office equipment, computer equipment, software and automobiles | 1,973 | | | 2,105 | |
| Construction in progress | 31 | | | 88 | |
| 16,264 | | | 16,432 | |
| Less accumulated depreciation and amortization | (15,683) | | | (15,256) | |
| Total property and equipment, net | 581 | | | 1,176 | |
| INTANGIBLE ASSETS: | | | |
| Indefinite lived intangibles | 63,266 | | | 63,266 | |
| | | |
| Other intangibles | 3,649 | | | 2,154 | |
| | 66,915 | | | 65,420 | |
| Less accumulated amortization | (2,212) | | | (2,154) | |
| Total intangible assets, net | 64,703 | | | 63,266 | |
| OTHER ASSETS: | | | |
| Operating lease right of use assets | 5,088 | | | 7,250 | |
| Deposits and other | 78 | | | 343 | |
| Total other assets | 5,166 | | | 7,593 | |
| Noncurrent assets of discontinued operations | — | | | 54,612 | |
| Total assets | $ | 96,705 | | | $ | 148,288 | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MEDIACO HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS – (CONTINUED)
| | | | | | | | | | | |
| (in thousands, except share data) | DECEMBER 31,
2022 | | DECEMBER 31,
2021 |
| LIABILITIES AND RETAINED DEFICIT | | | |
| CURRENT LIABILITIES: | | | |
| Accounts payable and accrued expenses | $ | 3,880 | | | $ | 2,342 | |
| Current maturities of long-term debt | — | | | 2,754 | |
| Accrued salaries and commissions | 875 | | | 1,135 | |
| Deferred revenue | 825 | | | 1,297 | |
| Operating lease liabilities | 1,816 | | | 2,276 | |
| Other | 35 | | | 1,259 | |
| Income taxes payable | 3,008 | | | — | |
| Current liabilities of discontinued operations | 659 | | | 2,920 | |
| Total current liabilities | 11,098 | | | 13,983 | |
| LONG-TERM DEBT, NET OF CURRENT PORTION | 5,950 | | | 97,527 | |
| OPERATING LEASE LIABILITIES, NET OF CURRENT | 3,808 | | | 5,667 | |
| | | |
| DEFERRED INCOME TAXES | 2,483 | | | 2,147 | |
| OTHER NONCURRENT LIABILITIES | 51 | | | 16 | |
| NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS | — | | | 18,509 | |
| Total liabilities | 23,390 | | | 137,849 | |
| COMMITMENTS AND CONTINGENCIES (NOTE 11) | | | |
| SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $0.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED; 260,000 AND 270,000 SHARES ISSUED AND OUTSTANDING AT DECEMBER 31, 2022 AND 2021 | 26,339 | | | 27,010 | |
| EQUITY (DEFICIT): | | | |
| Class A common stock, $0.01 par value; authorized 170,000,000 shares; issued and outstanding 20,443,138 shares and 3,056,757 shares at December 31, 2022 and 2021, respectively | 207 | | | 31 | |
| Class B common stock, $0.01 par value; authorized 50,000,000 shares; issued and outstanding 5,413,197 shares at December 31, 2022 and 2021 | 54 | | | 54 | |
| Class C common stock, $0.01 par value; authorized 30,000,000 shares; none issued | — | | | — | |
| Additional paid-in capital | 59,817 | | | 24,030 | |
| Accumulated deficit | (13,102) | | | (40,686) | |
| Total equity (deficit) | 46,976 | | | (16,571) | |
| Total liabilities and equity | $ | 96,705 | | | $ | 148,288 | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MEDIACO HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2022, AND 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Common Stock | | Class B Common Stock | | | | | | |
| (in thousands, except share data) | Shares | | Amount | | Shares | | Amount | | APIC | | Retained Earnings (Deficit) | | Total |
| BALANCE, DECEMBER 31, 2020 | 1,785,880 | | | $ | 18 | | | 5,413,197 | | | $ | 54 | | | $ | 20,772 | | | $ | (31,852) | | | $ | (11,008) | |
| Net loss | — | | | — | | | — | | | — | | | — | | | (6,082) | | | (6,082) | |
| Sale of class A common shares | 34,609 | | | 1 | | | — | | | — | | | 341 | | | — | | | 342 | |
| Issuance of class A to employees, officers and directors | 1,236,268 | | | 12 | | | — | | | — | | | 2,917 | | | — | | | 2,929 | |
| Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (2,752) | | | (2,752) | |
| BALANCE, DECEMBER 31, 2021 | 3,056,757 | | | $ | 31 | | | 5,413,197 | | | $ | 54 | | | $ | 24,030 | | | $ | (40,686) | | | $ | (16,571) | |
| Net income | — | | | — | | | — | | | — | | | — | | | 30,914 | | | 30,914 | |
| | | | | | | | | | | | | |
| Issuance of class A to employees, officers and directors | 530,001 | | | 6 | | | — | | | — | | | 1,275 | | | — | | | 1,281 | |
| Conversion of convertible promissory notes | 13,714,730 | | | 138 | | | — | | | — | | | 30,766 | | | — | | | 30,904 | |
| Conversion of preferred shares | 3,328,728 | | | 34 | | | — | | | — | | | 3,966 | | | — | | | 4,000 | |
| Repurchase of class A common shares | (187,078) | | | (2) | | | — | | | — | | | (220) | | | — | | | (222) | |
| Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (3,330) | | | (3,330) | |
| BALANCE, DECEMBER 31, 2022 | 20,443,138 | | | $ | 207 | | | 5,413,197 | | | $ | 54 | | | $ | 59,817 | | | $ | (13,102) | | | $ | 46,976 | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MEDIACO HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | |
| Year ended December 31, |
| (in thousands) | 2022 | | 2021 |
| OPERATING ACTIVITIES: | | | |
| Consolidated net income (loss) | $ | 30,914 | | | $ | (6,082) | |
| Less: (Income) loss from discontinued operations, net of tax | (40,709) | | | 1,884 | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities from continuing operations: | | | |
| Noncash loss on debt extinguishment | 1,180 | | | 81 | |
| Depreciation and amortization | 666 | | | 688 | |
| Amortization of deferred financing costs, including original issue discount | 610 | | | 636 | |
| Noncash interest expense | 1,436 | | | 3,575 | |
| Noncash lease expense | 2,162 | | | 2,004 | |
| | | |
| | | |
| Provision for deferred income taxes | 336 | | | 348 | |
| Noncash compensation | 2,514 | | | 3,430 | |
| | | |
| Other noncash items | 60 | | | 42 | |
| Changes in assets and liabilities: | | | |
| Accounts receivable | 3,626 | | | (5,445) | |
| Prepaid expenses and other current assets | 576 | | | (523) | |
| | | |
| Accounts payable and accrued liabilities | 1,062 | | | 444 | |
| Deferred revenue | (472) | | | 602 | |
| Operating lease liabilities | (2,319) | | | (2,720) | |
| Other liabilities | 678 | | | 421 | |
| Net cash provided by (used in) continuing operating activities | 2,320 | | | (615) | |
| Net cash provided by discontinued operating activities | (122) | | | 3,555 | |
| Net cash provided by operating activities | 2,198 | | | 2,940 | |
| INVESTING ACTIVITIES: | | | |
| Purchases of property and equipment | (76) | | | (366) | |
| Purchases of internally-created software | (1,293) | | | — | |
| | | |
| Proceeds from sale of discontinued operations | 78,982 | | | — | |
| Net cash provided by (used in) continuing investing activities | 77,613 | | | (366) | |
| Net cash used in discontinued investing activities | (422) | | | (891) | |
| Net cash provided by (used in) investing activities | 77,191 | | | (1,257) | |
| FINANCING ACTIVITIES: | | | |
| Payments on long-term debt | (68,573) | | | (3,000) | |
| Proceeds from long-term debt | — | | | 4,000 | |
| Proceeds of class A common stock issuances | — | | | 342 | |
| Repurchases of class A common stock | (222) | | | — | |
| Payments for debt related costs | — | | | (354) | |
| Settlement of tax withholding obligations | (1,343) | | | (686) | |
| Net cash (used in) provided by continuing financing activities | (70,138) | | | 302 | |
| Net cash used in discontinued financing activities | (71) | | | (35) | |
| Net cash (used in) provided by financing activities | (70,209) | | | 267 | |
| INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 9,180 | | | 1,950 | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | | | |
| Beginning of period | 6,121 | | | 4,171 | |
| End of period | $ | 15,301 | | | $ | 6,121 | |
| | | | | | | | | | | |
| Less: Cash, cash equivalents and restricted cash of discontinued operations | $ | — | | | $ | — | |
| Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | 15,301 | | | $ | 6,121 | |
| SUPPLEMENTAL DISCLOSURES: | | | |
| Cash paid for: | | | |
| Interest | $ | 7,311 | | | $ | 6,308 | |
| Income taxes | — | | | — | |
| | | |
| | | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MEDIACO HOLDING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Unless Indicated Otherwise)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
MediaCo Holding Inc. (“MediaCo” or the “Company”) is an owned and operated multi-media company formed in Indiana in 2020, focused on radio and digital advertising, premium programming and events.
Our assets consist of two radio stations, WQHT(FM) and WBLS(FM) (the “Stations”), which serve the New York City demographic market area that primarily targets Black, Hispanic, and multi-cultural consumers. We derive our revenues primarily from radio and digital advertising sales, but we also generate revenues from events, including sponsorships and ticket sales, licensing, and syndication.
On December 9, 2022, Fairway Outdoor LLC, FMG Kentucky, LLC and FMG Valdosta, LLC (collectively, “Fairway”), all of which are wholly owned direct and indirect subsidiaries of MediaCo, entered into an Asset Purchase Agreement (the “Purchase Agreement”), with The Lamar Company, L.L.C., a Louisiana limited liability company (the “Purchaser”). The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement. The purchase price was $78.6 million, subject to certain customary adjustments, paid at closing in cash. The sale resulted in a pre-tax gain of $46.9 million in the fourth quarter of 2022.
We have classified the related assets and liabilities associated with our Fairway business as discontinued operations in our consolidated balance sheets and the results of our Fairway business have been presented as discontinued operations in our consolidated statements of income for all periods presented through December 9, 2022 as the sale represented a strategic shift in our business that had a major effect on our operations and financial results. Unless otherwise noted, discussion in the notes to consolidated financial statements refers to the Company's continuing operations. See Note 2 — Discontinued Operations for additional information.
Unless the context otherwise requires, references to “we”, “us” and “our” refer to MediaCo and its subsidiaries.
Basis of Presentation and Consolidation
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring adjustments) have been included.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Revenue Recognition
The Company generates revenue from the sale of services including, but not limited to: (i) on-air commercial broadcast time, (ii) non-traditional revenues including event-related revenues and event sponsorship revenues, and (iii) digital advertising. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue. Substantially all deferred revenue is recognized within twelve months of the payment date. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Advertising revenues presented in the financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues.
Allowance for Doubtful Accounts
An allowance for doubtful accounts is recorded based on management’s judgment of the collectability of receivables. When assessing the collectability of receivables, management considers, among other things, historical loss experience and existing economic conditions. Amounts are written off after all normal collection efforts have been exhausted. The activity in the allowance for doubtful accounts for the years ended December 31, 2022, and 2021, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance At Beginning Of Period | | Provision | | Write-Offs | | Balance At End Of Period |
| Year ended December 31, 2021 | $ | 217 | | | 42 | | | (73) | | | $ | 186 | |
| Year ended December 31, 2022 | $ | 186 | | | 2 | | | (66) | | | $ | 122 | |
Cash and Cash Equivalents
MediaCo considers time deposits, money market fund shares and all highly liquid debt investment instruments with original maturities of three months or less to be cash equivalents. At times, such deposits may be in excess of FDIC insurance limits. Restricted cash at December 31, 2022 represents $2.5 million held in escrow related to the Company's disposition of the Fairway business and $1.8 million held as collateral for a letter of credit entered into in connection with the lease in New York City for our radio operations and corporate offices.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is generally computed using the straight-line method over the estimated useful lives of the related assets, which are 30 to39 years for buildings, the shorter of economic life or expected lease term for leasehold improvements, five to seven years for broadcasting equipment, five years for automobiles, office equipment and computer equipment, and three to five years for software. Maintenance, repairs and minor renewals are expensed as incurred; improvements are capitalized. On a continuing basis, the Company reviews the carrying value of property and equipment for impairment. If events or changes in circumstances were to indicate that an asset carrying value may not be recoverable, a write-down of the asset would be recorded through a charge to operations. See below for more discussion of impairment policies related to our property and equipment. Depreciation expense for the years ended December 31, 2022, and 2021, was $0.6 million and $0.5 million, respectively.
Intangible Assets
Indefinite-lived Intangibles
In accordance with ASC Topic 350, “Intangibles—Goodwill and Other,” radio broadcasting licenses are not amortized, but are tested at least annually for impairment at the reporting unit level and unit of accounting level, respectively. We test for impairment annually, on October 1 of each year, or more frequently when events or changes in circumstances or other conditions suggest impairment may have occurred. Impairment exists when the asset carrying values exceed their respective fair values, and the excess is then recorded to operations as an impairment charge. See Note 10 — Intangible Assets, for more discussion of our annual impairment tests performed during the years ended December 31, 2022, and 2021.
Definite-lived Intangibles
The Company’s definite-lived intangible assets consist of software developed internally and programming agreements related to our radio business. These are amortized over the period of time the intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows.
Advertising Costs
Advertising costs are expensed when incurred. Advertising expenses were $0.6 million and $0.2 million for the years ended December 31, 2022, and 2021, respectively.
Deferred Revenue and Barter Transactions
Deferred revenue includes deferred barter and other transactions in which payments are received prior to the performance of services (e.g., cash-in-advance advertising). Barter transactions are recorded at the estimated fair value of the product or service received. Revenue from barter transactions is recognized when commercials are broadcast. The appropriate expense or asset is recognized when merchandise or services are used or received. Barter revenues were $0.8 million for the years ended December 31, 2022, and 2021. Barter expenses were $0.8 million for the years ended December 31, 2022, and 2021.
Earnings Per Share
Our basic and diluted net loss per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Shares of Series A preferred stock include rights to participate in dividends and distributions to common stockholders on an if-converted basis, and accordingly are considered participating securities. During periods of undistributed losses however, no effect is given to our participating securities since they are not contractually obligated to share in the losses. We have elected to determine the earnings allocation based on income (loss) from continuing operations. As there is a loss from continuing operations, all potentially dilutive items were anti-dilutive and thus basic and diluted weighted-average shares are the same.
The following is a reconciliation of basic and diluted net loss per share attributable to Class A and Class B common shareholders:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Numerator: | | | |
| Loss from continuing operations | $ | (9,795) | | | $ | (4,198) | |
| Less: Preferred stock dividends | (3,330) | | | (2,752) | |
| | | |
| Loss from continuing operations available to common shareholders | (13,125) | | | (6,950) | |
| Income (loss) from discontinued operations, net of income taxes | 40,709 | | | (1,884) | |
| Net income (loss) available to common shareholders | 27,584 | | | (8,834) | |
| | | |
| Denominator: | | | |
| Weighted-average shares of common stock outstanding — basic and diluted | 13,380 | | | 7,217 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Earnings per share of common stock attributable to common shareholders: | | | |
| Net income (loss) per share attributable to common shareholders - basic and diluted: | | | |
| Continuing operations | $ | (0.98) | | | $ | (0.96) | |
| Discontinued operations | 3.04 | | | (0.26) | |
| Net income (loss) per share attributable to common shareholders - basic and diluted: | $ | 2.06 | | | $ | (1.22) | |
| | | |
| | | |
| | | |
| | | |
| | | |
The following convertible equity shares and restricted stock awards were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive.
| | | | | | | | | | | |
| Year Ended December 31, |
| (in thousands) | 2022 | | 2021 |
| Convertible Emmis promissory note | 1,400 | | | 2,269 | |
| Convertible Standard General promissory notes | 3,088 | | | 8,725 | |
| Series A convertible preferred stock | 6,105 | | | 9,845 | |
| Restricted stock awards | 331 | | | 515 | |
| Total | 10,924 | | | 21,354 | |
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company’s financial statements or income tax returns. Income taxes are recognized during the year in which the underlying transactions are reflected in the consolidated statements of operations. Deferred taxes are provided for temporary differences between amounts of assets and liabilities as recorded for financial reporting purposes and amounts recorded for income tax purposes.
After determining the total amount of deferred tax assets, the Company determines whether it is more likely than not that some portion of the deferred tax assets will not be realized. If the Company determines that a deferred tax asset is not likely to be realized, a valuation allowance will be established against that asset to record it at its expected realizable value.
Definite-Lived Long-Lived Tangible Assets
The Company periodically considers whether indicators of impairment of definite-lived long-lived tangible assets are present. If such indicators are present, the Company determines whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If less, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals and other methods. If the assets determined to be impaired are to be held and used, the Company recognizes an impairment charge to the extent the asset’s carrying value is greater than the fair value. The fair value of the asset then becomes the asset’s new carrying value, which the Company depreciates or amortizes over the remaining estimated useful life of the asset.
Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates.
Reclassifications
Certain amounts have been reclassified to conform to the current year presentation.
Recent Accounting Pronouncements Not Yet Implemented
In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses, which introduces new guidance for an approach based on using expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities and net investments in leases as well as reinsurance and trade receivables. This standard will be effective for us as of January 1, 2023. We do not expect the adoption of the new standard to have a significant impact on our consolidated financial statements.
2. DISCONTINUED OPERATIONS
On December 9, 2022, Fairway entered into the Purchase Agreement with the Purchaser. The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement. The purchase price was $78.6 million, subject to certain customary adjustments, paid at closing in cash. The sale resulted in a pre-tax gain of $46.9 million in the fourth quarter of 2022.
In accordance with ASC 205-20-S99-3, Allocation of Interest to Discontinued Operations, the Company elected to allocate interest expense to discontinued operations where the debt is not directly attributed to the Fairway business. Interest expense was allocated based on a ratio of net assets discontinued to the sum of consolidated net assets plus consolidated debt.
In addition, upon closing we entered into a transition service agreement with the Purchaser to support the operations after the divestiture for immaterial fees. This agreement commenced with the close of the transaction and was terminated at the end of the initial term in February 2023.
The financial results of Fairway are presented as income from discontinued operations on our consolidated statements of income through December 9, 2022, when the sale was completed. The following table presents the financial results of Fairway:
| | | | | | | | | | | |
| Year ended December 31, |
| 2022(a) | | 2021 |
| Net revenues | $ | 13,484 | | | $ | 13,766 | |
| OPERATING EXPENSES | | | |
| Operating expenses excluding depreciation and amortization expense | 10,368 | | | 9,057 | |
| Depreciation and amortization | 3,035 | | | 3,237 | |
| Loss (gain) on disposal of assets | 68 | | | (47) | |
| Total operating expenses | 13,471 | | | 12,247 | |
| Income from operations of discontinued operations | 13 | | | 1,519 | |
| Interest and other, net | (3,094) | | | (3,393) | |
| Loss from discontinued operations before income taxes and gain on sale | (3,081) | | | (1,874) | |
| Pre-tax gain on sale | 46,875 | | | — | |
| Income (loss) from discontinued operations, before income taxes | 43,794 | | | (1,874) | |
| Income tax provision | (3,085) | | | (10) | |
| Income (loss) from discontinued operations, net of income taxes | $ | 40,709 | | | $ | (1,884) | |
(a) Includes Fairway financial results through the transaction close on December 9, 2022 and the related gain on sale.
The following table presents the aggregate carrying amounts of assets and liabilities of discontinued operations for Fairway in the consolidated balance sheets:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Assets: | | | |
| Accounts receivable, net | 1,026 | | | 1,560 | |
| Prepaid expenses | — | | | 74 | |
| Other | 40 | | | 117 | |
| Total current assets of discontinued operations | 1,066 | | | 1,751 | |
| Property and equipment, net | — | | | 25,358 | |
| Goodwill | — | | | 13,102 | |
| Other intangible assets, net | — | | | 1,661 | |
| | | |
| Operating lease right of use assets | — | | | 14,413 | |
| Deferred tax assets | — | | | 78 | |
| Total noncurrent assets of discontinued operations | — | | | 54,612 | |
| Total assets of discontinued operations | 1,066 | | | 56,363 | |
| Liabilities: | | | |
| Accounts payable and accrued expenses | 659 | | | 368 | |
| Accrued salaries and commissions | — | | | 149 | |
| Deferred revenue | — | | | 725 | |
| Operating lease liabilities | — | | | 1,526 | |
| Other current liabilities | — | | | 152 | |
| Total current liabilities of discontinued operations | 659 | | | 2,920 | |
| Operating lease liabilities, net of current | — | | | 11,242 | |
| Asset retirement obligations | — | | | 7,267 | |
| Total noncurrent liabilities of discontinued operations | — | | | 18,509 | |
| Total liabilities of discontinued operations | 659 | | | 21,429 | |
3. COMMON STOCK
MediaCo has authorized Class A common stock, Class B common stock, and Class C common stock. The rights of these three classes are essentially identical except that each share of Class A common stock has one vote with respect to substantially all matters, each share of Class B common stock has 10 votes with respect to substantially all matters, and each share of Class C common stock has no voting rights with respect to substantially all matters. All Class B common stock outstanding is owned by SG Broadcasting. At December 31, 2022 and December 31, 2021, no shares of Class C common stock were issued or outstanding.
On December 16, 2022, our Board approved a stock repurchase plan (the “Repurchase Plan”), to repurchase from time to time, in the open market or through privately negotiated transactions, shares, up to $2.0 million in the aggregate of shares of our Class A common stock. The timing of purchases and the exact number of shares to be purchased depends on market conditions. The Repurchase Plan does not include specific price targets or timetables and may be suspended or terminated at any time. During the fourth quarter of 2022, we repurchased under the Repurchase Plan 187,078 shares of Class A common stock for an aggregate of $0.2 million. Subsequent to December 31, 2022 through March 17, 2023 we repurchased under the Repurchase Plan an additional 382,137 shares of Class A common stock for an aggregate of $0.6 million.
On August 20, 2021, MediaCo Holding Inc. entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc.(“B. Riley”), pursuant to which the Company may offer and sell, from time to time through or to B. Riley, as agent or principal, shares of the Company’s Class A Common Stock, $0.01 par value per share, having an aggregate offering price of up to $12.5 million. During the year ended December 31, 2021, Class A stock totaling $0.3 million was sold under the agreement. During the year ended December 31, 2022, no stock was sold under this agreement.
4. CONVERTIBLE PREFERRED STOCK
The Company issued to SG Broadcasting 220,000 shares of MediaCo Series A Convertible Preferred Stock, par value $0.01 (the “MediaCo Series A Preferred Shares”) in exchange for a cash contribution of $22.0 million (the “SG Broadcasting Contribution”). This issuance of shares was issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended. This issuance was not a “public offering” because no more than 35 non-accredited investors received securities of the Company, the Company did not engage in general solicitation or advertising with regard to the issuance and sale of shares of MediaCo Series A Preferred Shares and the Company did not make a public offering in connection with the sale of shares of MediaCo Series A Preferred Shares.
MediaCo Series A Preferred Shares rank senior in preference to the MediaCo Class A common stock, MediaCo Class B common stock, and the MediaCo Class C common stock. Pursuant to the Articles of Amendment, the ability of the Company to make distributions with respect to, or make a liquidation payment on, any other class of capital stock in the Company designated to be junior to, or on parity with, the MediaCo Series A Preferred Shares, will be subject to certain restrictions, including that (i) the MediaCo Series A Preferred Shares shall be entitled to receive the amount of dividends per share that would be payable on the number of whole common shares of the Company into which each share of MediaCo Series A Preferred Share could be converted, and (ii) the MediaCo Series A Preferred Shares, upon any liquidation, dissolution or winding up of the Company, shall be entitled to a preference on the assets of the Company. Issued and outstanding shares of MediaCo Series A Preferred Shares shall accrue cumulative dividends, payable in kind, at an annual rate equal to the interest rate on any senior debt of the Company (see Note 7), or if no senior debt is outstanding, 6%, plus additional increases of 1% on December 12, 2020 and each anniversary thereof. On December 13, 2022, and 2021, dividends of $3.4 million and $2.7 million, respectively, were paid in kind. The payment in kind increased the accrued value of the preferred stock and 80,000 additional shares were issued as part of this payment.
MediaCo Series A Preferred Shares are redeemable for cash at the option of SG Broadcasting at any time on or after June 12, 2025, and so the shares are classified outside of permanent equity. The Series A Preferred Shares are also convertible into shares of Class A common stock at the option of SG Broadcasting at any time after May 25, 2020, with the number of shares of common stock determined by dividing the original contribution, plus accrued dividends, by the 30-day volume weighted average share price of Class A common shares. On and after May 25, 2020, when the conversion option became effective, the Series A Preferred Shares became participating securities and we began calculating earnings per share using the two-class method.
There were 300,000 shares designated as MediaCo Series A Preferred shares available to be issued as of December 31, 2022, and 2021. On March 23, 2023, the Company filed Articles of Amendment to its Articles of Amendment of Amended & Restated Articles of Incorporation to increase the number of designated shares of MediaCo Series A Preferred Shares from 300,000 to 500,000. The additional shares will only be issued in payment of the PIK dividend payable on outstanding shares of the Convertible Preferred Stock.
On December 28, 2022, SG Broadcasting exercised its right to partially convert $4.0 million of the outstanding balance on the MediaCo Series A Preferred Shares, for 3.3 million shares of the Company's Class A common stock.
5. SHARE BASED PAYMENTS
The amounts recorded as share based compensation expense consist of restricted stock awards issued to officers and employees that have vesting periods up to three years. Awards are typically made pursuant to employment agreements. Restricted stock awards are granted out of the Company’s 2022 and 2021 Equity Compensation Plans.
We determine the fair value of restricted stock awards based on the closing price of our stock on the date of grant. We generally recognize compensation expense related to restricted stock awards on a straight-line basis over the period during which the restriction lapses. Forfeitures are recognized in the period in which they occur. The following table presents a summary of the Company’s restricted stock grants outstanding at December 31, 2022, and restricted stock activity during the year ended December 31, 2022 (“Price” reflects the weighted average share price at the date of grant):
| | | | | | | | | | | |
| Awards | | Price |
| Grants outstanding, beginning of period | 1,084 | | | $ | 3.77 | |
| Granted | 940 | | | 3.16 | |
| Vested (restriction lapsed) | (1,138) | | | 3.60 | |
| Forfeited | (30) | | | 9.93 | |
| Grants outstanding, end of period | 856 | | | $ | 3.10 | |
Recognized Non-Cash Compensation Expense
The following table summarizes stock-based compensation expense recognized by the Company for the years ended December 31, 2022, and 2021. The Company recognized tax benefits of $0.2 million related to stock-based compensation for the year ended December 31, 2021. Tax expense related to stock compensation for the year ended December 31, 2022 was not material.
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Operating expenses excluding depreciation and amortization | $ | 565 | | | $ | 1,216 | |
| Corporate expenses | 1,950 | | | 2,214 | |
| Income from discontinued operations before income taxes | 232 | | | 220 | |
| Stock-based compensation expense | $ | 2,747 | | | $ | 3,650 | |
As of December 31, 2022, there was $1.6 million of unrecognized compensation cost related to nonvested stock-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 1.8 years.
6. REVENUE
The Company generates revenue from the sale of services including, but not limited to: (i) on-air commercial broadcast time, (ii) non-traditional revenues including event-related revenues and event sponsorship revenues, and (iii) digital advertising. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue. Substantially all deferred revenue is recognized within twelve months of the payment date. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Advertising revenues presented in the consolidated financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues.
Radio Advertising
On-air broadcast revenue is recognized when or as performance obligations under the terms of a contract with a customer are satisfied. This typically occurs over the period of time that advertisements are provided, or as an event occurs. Revenues are reported at the amount the Company expects to be entitled to receive under the contract. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the consolidated balance sheets. Substantially all deferred revenue is recognized within twelve months of the payment date.
Nontraditional
Nontraditional revenues principally consist of ticket sales and sponsorship of events our stations conduct in their local market. These revenues are recognized when our performance obligations are fulfilled, which generally coincides with the occurrence of the related event.
Digital
Digital revenue relates to revenue generated from the sale of digital marketing services (including display advertisements and video sponsorships) to advertisers on Company-owned websites and from revenue generated from content distributed across other digital platforms. Digital revenues are generally recognized as the digital advertising is delivered.
Other
Other revenue includes barter revenue and network revenue. The Company provides advertising broadcast time in exchange for certain products and services, including on-air radio programming. These barter arrangements generally allow the Company to preempt such bartered broadcast time in favor of advertisers who purchase time for cash consideration. These barter arrangements are valued based upon the Company’s estimate of the fair value of the products and services received. Revenue is recognized on barter arrangements when we broadcast the advertisements. Advertisements delivered under barter arrangements are typically aired during the same period in which the products and services are consumed. The Company also sells certain remnant advertising inventory to third-parties for cash, and we refer to this as network revenue. The third-parties aggregate our remnant inventory with other broadcasters' remnant inventory for sale to third parties, generally to large national advertisers. This network revenue is recognized as we broadcast the advertisements.
Disaggregation of revenue
The following table presents the Company's revenues disaggregated by revenue source:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Net revenues: | | | | | | | |
| Radio Advertising | $ | 25,790 | | | 66.8 | % | | $ | 30,012 | | | 71.9 | % |
| Nontraditional | 3,973 | | | 10.3 | % | | 4,864 | | | 11.7 | % |
| Digital | 4,713 | | | 12.2 | % | | 2,864 | | | 6.9 | % |
| Other | 4,119 | | | 10.7 | % | | 3,987 | | | 9.5 | % |
| Total net revenues | $ | 38,595 | | | | | $ | 41,727 | | | |
7. LONG-TERM DEBT
Long-term debt was comprised of the following at December 31, 2022, and December 31, 2021:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Senior credit facility | $ | — | | | $ | 68,343 | |
| Notes payable to Emmis | 5,950 | | | 6,154 | |
| Notes payable to SG Broadcasting | — | | | 27,574 | |
| Less: Current maturities | — | | | (2,754) | |
| Less: Unamortized original discount | — | | | (1,790) | |
| Total long-term debt, net of current portion and debt discount | $ | 5,950 | | | $ | 97,527 | |
Senior secured term loan agreement
The Company had a five-year senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC, (“GACP”) a Delaware limited liability company, as administrative agent and collateral agent. The Senior Credit Facility bore interest at a rate equal to the London Interbank Offered Rate (“LIBOR”), plus 7.5%, with a 2.0% LIBOR floor and a 1.0% incremental interest rate paid in kind under certain circumstances (as discussed below). The Senior Credit Facility matured on November 25, 2024. Prior to subsequent amendments discussed below, the Senior Credit Facility required interest payments on the first business day of each calendar month, and quarterly payments on the principal in an amount equal to one and one quarter percent of the initial aggregate principal amount were due on the last day of each calendar quarter. At its inception, the Senior Credit Facility included covenants pertaining to, among other
things, the ability to incur indebtedness, restrictions on the payment of dividends, minimum liquidity requirements, collateral maintenance, minimum Consolidated Fixed Charge Coverage Ratio of 1.10:1.00, and other customary restrictions.
Several amendments were entered into by the Company and GACP to modify, among other things, certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility). On May 19, 2021, the Company entered into Amendment No. 4 to its Senior Credit Facility. Under the terms of Amendment No. 4:
•SG Broadcasting agreed to contribute up to $7.0 million to the Company in the form of subordinated debt, with $3.0 million contributed at closing, $1.0 million contributed on June 1, 2021, and up to an additional $3.0 million to be contributed through June 30, 2022, if necessary, to satisfy certain conditions described in Amendment No. 4;
•the Company made a principal payment of $3.0 million to reduce borrowings outstanding under the Senior Credit Facility;
•no quarterly scheduled principal payments are required through and including the quarter ending March 31, 2022;
•the Minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) was reduced to 1.00:1.00 from April 1, 2020 through and including December 31, 2022, with it increasing to 1.10:1.00 on and after January 1, 2023;
•for purposes of calculating compliance with the Minimum Consolidated Fixed Charge Coverage Ratio, Consolidated EBITDA (as defined in the Senior Credit Facility) includes certain amounts contributed by SG Broadcasting in the form of subordinated debt or equity, including those described above;
•for purposes of calculating the Company’s borrowing base under the Senior Credit Facility, the multiple applied to Billboard Cash Flow (as defined in the Senior Credit Facility) increased from 3.5 to 5.0 and the advance rate applied to the radio stations’ FCC licenses increased from 60% to 70%;
•at any time the multiple applied to Billboard Cash Flow exceeds 3.5 or the advance rate applied to the radio stations’ FCC licenses exceeds 60%, an incremental annual interest rate of 1.0% applies and is paid-in-kind monthly;
•certain specified events of default were waived; and
•an amendment fee of $0.4 million was paid in cash.
As a result of the $3.0 million payment made under the amendment, the Company recorded a loss on debt extinguishment of $81 thousand during the year ended December 31, 2021.
For the period May 19, 2021 through March 31, 2022, the multiple applied to billboard cash flow was in excess of 3.5x and the advance rate applied to the Company's FCC Licenses exceeded 60% in order for the Company to achieve minimal compliance with its loan to value covenant. Therefore, the incremental annual interest rate of 1.0% applied during this period and additional interest payments of $0.2 million were paid in kind during the three-month period ended March 31, 2022, all of which was added to the principal balance outstanding. For the period from April 1, 2022 to December 9, 2022, the incremental annual interest rate of 1.0% did not apply as the principal balance outstanding was less than the minimum borrowing base.
On November 12, 2022, MediaCo entered into Amendment No. 5 to its Senior Credit Facility, which lowered the minimum liquidity requirement to $2.0 million through December 15, 2022 and $3.0 million thereafter and removed the testing requirement for the minimum consolidated fixed charge coverage ratio covenant on September 30, 2022.
On December 9, 2022, following the consummation of the transactions contemplated by the Purchase Agreement, the Company repaid in full, without penalty, all of its obligations under the Senior Credit Facility, which was terminated at that time.
Emmis Convertible Promissory Note
Our November 25, 2019 convertible promissory note payable to Emmis Communications Corporation (the “Emmis Convertible Promissory Note”) carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0%, plus an additional 1.0% on any payment of interest in kind and, without regard to whether the Company pays such interest in kind, an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. Because the Senior Credit Facility prohibited the Company from paying interest in cash on the Emmis Convertible Promissory Note, the Company has been accruing interest since inception using the rate applicable if the interest will be paid-in-kind. The Emmis Convertible Promissory Note is convertible, in whole or in part,
into MediaCo Class A common stock at the option of Emmis and at a strike price equal to the thirty-day volume weighted average price of the MediaCo Class A common stock on the date of conversion. The Emmis Convertible Promissory Note matures on November 25, 2024.
On December 21, 2022, Emmis exercised its right to partially convert the outstanding principal and accrued but unpaid interest on the Emmis Convertible Promissory Note of $0.9 million and $0.1 million, respectively, for 0.8 million of the Company's Class A common stock.
For the year ended December 31, 2022, interest of $0.8 million was paid-in-kind and added to the principal balance outstanding which was $6.0 million at December 31, 2022.
Second Amended and Restated SG Broadcasting Promissory Note, Additional SG Broadcasting Promissory Note and May 2021 SG Broadcasting Promissory Note
The 2019/2020 SG Broadcasting Promissory Notes (as defined below), which in July 2022 were converted in full into shares of MediaCo Class A common stock, carried interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. The 2019/2020 SG Broadcasting Promissory Notes were set to mature on May 25, 2025. Additionally, interest under the 2019/2020 SG Broadcasting Promissory Notes was payable in kind through maturity, and convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.
On May 19, 2021, the Company issued to SG Broadcasting a subordinated convertible promissory note (the “May 2021 SG Broadcasting Promissory Note” and, collectively with the 2019/2020 SG Broadcasting Promissory Notes, the “SG Broadcasting Promissory Notes”), in return for which SG Broadcasting contributed $3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No. 4. Up to $7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note. The May 2021 SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid-in-kind rate, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% on November 25, 2021 and additional annual increases of 1.0% following each successive anniversary thereafter. The May 2021 SG Broadcasting Promissory Note matures on May 25, 2025 and interest is payable in-kind through maturity. Subject to prior shareholder approval of the issuance of the shares, which was obtained on June 28, 2022, the May 2021 SG Broadcasting Promissory Note is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty-day volume weighted average price of the MediaCo Class A common stock on the date of conversion.
On June 1, 2021, SG Broadcasting contributed $1.0 million to the Company under the May 2021 SG Broadcasting Promissory Note as required by Amendment No. 4 to the Senior Credit Facility.
On March 18, 2022, the Company and SG Broadcasting agreed to amend the May 2021 SG Broadcasting Promissory Note to extend the Company’s ability to draw the remaining $3.0 million on the May 2021 SG Broadcasting Promissory Note from June 30, 2022 to June 30, 2023.
On July 28, 2022, SG Broadcasting exercised its right to convert the outstanding principal and accrued but unpaid interest on the SG Broadcasting Promissory Notes of $28.0 million and $1.9 million, respectively, for 12.9 million of the Company's Class A common stock. The 2019/2020 SG Broadcasting Promissory Notes were terminated at that time, while the May 2021 SG Broadcasting Promissory Note remains outstanding, but with no amounts outstanding as of December 31, 2022.
Based on amounts outstanding at December 31, 2022, mandatory principal payments of long-term debt are $6.0 million in 2024 (all under the Emmis Convertible Promissory Note) and none thereafter.
8. FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
Recurring Fair Value Measurements
The Company has no financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2022 or 2021.
Non-Recurring Fair Value Measurements
The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 10 —Intangible Assets, and are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 10 for more discussion).
Fair Value of Other Financial Instruments
Certain nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The estimated fair value of financial instruments is determined using the best available market information and appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition. The use of different market assumptions may have a material effect on the estimated fair value amounts. The following methods and assumptions were used to estimate the fair value of financial instruments:
•Cash and cash equivalents: The carrying amount of these assets approximates fair value because of the short maturity of these instruments.
•Other long-term debt: The Emmis Convertible Promissory Note is not actively traded and is considered a Level 3 instrument. The Company believes the current carrying value of this debt approximates its fair value.
9. LEASES
We determine if an arrangement is a lease at inception. We have operating leases for office space and tower space, expiring at various dates through August 2039. Some leases have options to extend and some have options to terminate. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our consolidated balance sheets.
Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. Our lease terms may include options to extend or terminate the lease, which we treat as exercised when it is reasonably certain and there is a significant economic incentive to exercise that option.
Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. None of our leases contain variable lease payments.
We elected not to apply the recognition requirements of ASC 842, “Leases”, to short-term leases, which are deemed to be leases with a lease term of twelve months or less. Instead, we recognized lease payments in the consolidated statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. We elected this policy for all classes of underlying assets. Short-term lease expense for the years ended December 31, 2022, and 2021, was not material.
The impact of operating leases to our consolidated financial statements was as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Lease Cost | | | |
| Operating lease cost | $ | 2,550 | | $ | 2,548 |
| Other Information | | | |
| Operating cash flows from operating leases | 2,996 | | 3,001 |
| | | |
| Weighted average remaining lease term - operating leases (in years) | 7.0 | | 6.5 |
| Weighted average discount rate - operating leases | 5.9 | % | | 5.7 | % |
As of December 31, 2022, the annual minimum lease payments of our operating lease liabilities were as follows:
| | | | | |
| Year ended December 31, | |
| 2023 | $ | 2,058 | |
| 2024 | 575 | |
| 2025 | 580 | |
| 2026 | 584 | |
| 2027 | 588 | |
| After 2027 | 2,532 | |
| Total lease payments | 6,917 | |
| Less: imputed interest | (1,293) | |
| Total recorded lease liabilities | $ | 5,624 | |
On November 18, 2022, the Company entered into a lease agreement in New York City for our radio operations and corporate offices. The lease commencement date was not until February 1, 2023 and as such, was not included in our consolidated balance sheets as of December 31, 2022. The noncancellable lease term extends through August 2039 and resulted in a right of use asset of $12.7 million and an operating lease liability of $12.7 million when recorded at lease commencement.
10. INTANGIBLE ASSETS
As of December 31, 2022 and 2021, intangible assets, net consisted of the following:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Indefinite-lived intangible assets: | | | |
| FCC Licenses | $ | 63,266 | | | $ | 63,266 | |
| | | |
| | | |
| Definite-lived intangible assets: | | | |
| | | |
| Software | 1,437 | | | — | |
| | | |
| Total | $ | 64,703 | | | $ | 63,266 | |
In accordance with ASC Topic 350, Intangibles—Goodwill and Other, the Company reviews intangible assets at least annually for impairment. In connection with any such review, if the recorded value of intangible assets is greater than its fair value, they are written down and charged to results of operations. Our FCC licenses were successfully renewed in 2022 through June 2030. FCC licenses are renewed every eight years at a nominal cost, and historically both of our FCC licenses have been renewed at the end of their respective eight-year periods. Since we expect that both of our FCC licenses will continue to be renewed in the future, we believe they have indefinite lives. Given that our radio stations operate in the same geographic market they are considered a single unit of accounting.
Impairment Testing
The Company generally performs its annual impairment review of indefinite-lived intangibles as of October 1 each year. At the time of each impairment review, if the fair value of the indefinite-lived intangible is less than its carrying value, a charge is recorded to results of operations. When indicators of impairment are present, the Company will perform an interim impairment test. We will perform additional interim impairment assessments whenever triggering events suggest
such testing for the recoverability of these assets is warranted. During the years ended December 31, 2022, and 2021, the Company did not record any impairment losses.
Valuation of Indefinite-lived Broadcasting Licenses
Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company considers both income and market valuation methods when it performs its impairment tests. Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its market at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in its market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license.
Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. The projections incorporated into our license valuations take into consideration the current economic conditions. Under the market method, the Company uses recent sales of comparable radio stations for which the sales value appeared to be concentrated entirely in the value of the license, to arrive at an indication of fair value. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by ASC Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting.
Below are some of the key assumptions used in our income method annual impairment assessments. The long-term growth rates in the New York market in which we operate are based on recent industry trends and our expectations for the market going forward.
| | | | | | | | | | | |
| October 1, 2022 | | October 1, 2021 |
| Discount Rate | 12.7% | | 12.1% |
| Long-term Revenue Growth Rate | 0.6% | | 1.3% |
| Mature Market Share | 9.8% | | 9.2% |
| Operating Profit Margin | 23.5-29.0% | | 24.2-29.0% |
As of both December 31, 2022 and 2021, the carrying amount of the Company’s FCC licenses was $63.3 million.
Definite-lived Intangibles
The following table presents the weighted-average remaining useful life at December 31, 2022 and gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 | | December 31, 2021 |
| Weighted Average Remaining Useful Life
(in years) | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Software | 5.5 | | $ | 1,495 | | | $ | 58 | | | $ | 1,437 | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
The software was developed internally by our radio operations and represents our updated websites and mobile applications, which offer increased functionality and opportunities to grow and interact with our audience. They cost $1.5 million to develop and useful lives of five years and seven years were assigned to the application and website, respectively.
Total amortization expense from definite-lived intangibles for the years ended December 31, 2022, and 2021, was $0.1 million and $0.2 million, related to an intangible asset that was fully amortized as of December 31, 2021, respectively. The Company estimates amortization expense each of the next five years as follows:
| | | | | | | | |
| Year ended December 31, | | Amortization Expense |
| 2023 | | $ | 270 | |
| 2024 | | 270 | |
| 2025 | | 270 | |
| 2026 | | 270 | |
| 2027 | | 227 | |
| After 2027 | | 130 | |
| Total | | $ | 1,437 | |
11. OTHER COMMITMENTS AND CONTINGENCIES
Commitments
In addition to the lease payments described in Note 9, the Company has various commitments under contracts that include purchase obligations, employment agreements and leases commencing in 2023 with annual commitments at December 31, 2022 as follows:
| | | | | | | | |
| Year ended December 31, | | Total Payments |
| 2023 | | $ | 1,064 | |
| 2024 | | 1,600 | |
| 2025 | | 1,560 | |
| 2026 | | 1,865 | |
| 2027 | | 1,891 | |
| Thereafter | | 26,383 | |
| Total | | $ | 34,363 | |
Litigation
From time to time, our stations are parties to various legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.
On April 1, 2022, the Company received a deficiency letter (the “Nasdaq Letter”) from the Nasdaq Listing Qualifications Department, notifying the Company that the Company is not in compliance with Nasdaq Listing Rule 5550(b)(3), which requires the Company to maintain net income from continuing operations of $0.5 million in the most recently completed fiscal year, or in two of the three most recently completed fiscal years (the “Minimum Net Income Requirement”), nor is it in compliance with either of the alternative listing standards, market value of listed securities or stockholders’ equity. The Company’s failure to comply with the Minimum Net Income Requirement was based on the Company’s filing of its Annual Report on Form 10-K for the year ended December 31, 2021, reporting net loss from continuing operations of $6.1 million.
Pursuant to the Nasdaq Letter, the Company had 45 calendar days from the date of the Nasdaq Letter to submit a plan to regain compliance, and submitted such a plan during this period. The plan was accepted and Nasdaq granted an extension of up to 180 calendar days from the date of the Nasdaq Letter to evidence compliance.
On July 28, 2022, the holder exercised its right under the SG Broadcasting Promissory Notes to convert the outstanding principal and accrued but unpaid interest of $28.0 million and $1.9 million, respectively, for 12.9 million shares of the Company's Class A common stock. The Note Conversion increased the Company’s stockholders’ equity by approximately $29.9 million. As a result, the Company regained compliance with the stockholders’ equity requirement based upon the transactions and events described above.
On August 1, 2022, Nasdaq sent the Company a letter confirming conditional compliance with Listing Rule 5550(b)(1), reminding the Company that it must maintain compliance on a go forward basis (the “Nasdaq Compliance Letter”).
On November 15, 2022, the Company received a second deficiency letter (the “Second Nasdaq Letter”) from the staff of the Nasdaq Listing Qualifications Department (the “Staff”) stating that because the Company had reported stockholders’ equity of $2.0 million in its Quarterly Report on Form 10-Q for the period ended September 30, 2022, the Company no longer complies with Nasdaq Listing Rule 5550(b)(1), which requires a minimum $2.5 million stockholders’
equity and thus the Company's Class A common stock (listed on The Nasdaq Capital Market) would be subject to delisting unless the Company requests a hearing before a Nasdaq Hearings Panel (the “Panel”) on or before November 22, 2022.
Pursuant to the Nasdaq Letter, the Company promptly requested a hearing before the Panel, with the intention of presenting a plan to regain compliance with the Rule.
On December 14, 2022, the Company received a letter (the “Third Nasdaq Letter”) from the Nasdaq Office of General Counsel stating that it had been informed the Staff that the Company’s stockholders’ equity deficiency had been cured, and that the Company is now in compliance with all applicable listing standards. Consequently, the Third Nasdaq Letter informed the Company that the scheduled hearing to appeal the delisting proceedings had been cancelled, and the Company’s stock will continue to be listed on The Nasdaq Stock Market.
12. INCOME TAXES
The provision for income taxes for continuing operations for the years ended December 31, 2022, and 2021, consisted of the following:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Current: | | | |
| Federal | $ | — | | | $ | — | |
| State | — | | | — | |
| Total current | — | | | — | |
| Deferred: | | | |
| Federal | 90 | | | 91 | |
| State | 246 | | | 257 | |
| Total deferred | 336 | | | 348 | |
| Provision for income taxes | $ | 336 | | | $ | 348 | |
The provision for income taxes for continuing operations for the years ended December 31, 2022, and 2021, differs from that computed at the Federal statutory corporate tax rate as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Federal statutory income tax rate | 21 | % | | 21 | % |
| Computed income tax provision at federal statutory rate | $ | (1,986) | | | $ | (809) | |
| State income tax | (652) | | | (198) | |
| State tax rate change | (278) | | | — | |
| Equity based compensation | 32 | | | (205) | |
| | | |
| Valuation allowance | 3,188 | | | 1,544 | |
| Other | 32 | | | 16 | |
| Provision for income taxes | $ | 336 | | | $ | 348 | |
The final determination of our income tax liability may be materially different from our income tax provision. Significant judgment is required in determining our provision for income taxes. Our calculation of the provision for income taxes is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service and other taxing authorities. As of December 31, 2022, the Company had no open income tax examinations.
The components of deferred tax assets and deferred tax liabilities at December 31, 2022, and 2021, were as follows:
| | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 |
| Deferred tax assets: | | | |
| Intangible assets | $ | 12,197 | | | $ | 13,622 | |
| Lease liability | 1,749 | | | 6,230 | |
| Interest deduction carryforward | 5,915 | | | 4,311 | |
| Stock compensation | 340 | | | 726 | |
| Net operating losses | 450 | | | 8,674 | |
| Property and equipment | 812 | | | — | |
| Other | 112 | | | 412 | |
| Valuation allowance | (14,718) | | | (21,000) | |
| Total deferred tax assets | 6,857 | | | 12,975 | |
| Deferred tax liabilities | | | |
| Indefinite-lived intangible assets | (7,763) | | | (7,056) | |
| Right of use asset | (1,577) | | | (6,477) | |
| Property and equipment | — | | | (1,511) | |
| Total deferred tax liabilities | (9,340) | | | (15,044) | |
| Net deferred tax liabilities | $ | (2,483) | | | $ | (2,069) | |
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset (“DTA”) will not be realized. The Company has considered future taxable income and ongoing prudent and feasible tax-planning strategies in assessing the need for the valuation allowance. As of December 31, 2022, and 2021, the Company recorded a valuation allowance against its deferred tax assets, because the Company's management determined that it was more likely than not that certain assets would not be fully realized, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic.
The Company records certain deferred tax liabilities (“DTLs”) related to indefinite lived intangibles that are not expected to reverse during the carry-forward period. These DTLs can be considered a source of future taxable income to support realization of net operating losses (“NOLs”) that do not expire and DTAs that upon reversal would give rise to NOLs that do not expire. With this consideration, the total valuation allowance recorded at December 31, 2022, and 2021, was $14.7 million and $21.0 million, respectively, resulting in a net $2.5 million and $2.1 million DTL, respectively.
As of December 31, 2022, the Company has no federal net operating losses (“NOLs”) and state NOLs of $6.8 million available to offset future taxable income. Certain state NOL carryforwards begin expiring in the year ending December 2040.
Accounting Standards Codification paragraph 740-10 clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken within a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest benefit that is greater than 50 percent likely of being realized upon ultimate settlement. As of December 31, 2022, the Company has no uncertain tax positions.
13. RELATED PARTY TRANSACTIONS
Transaction Agreement with Emmis and SG Broadcasting
On June 28, 2019, MediaCo entered into a Contribution and Distribution Agreement with Emmis and SG Broadcasting, pursuant to which (i) Emmis contributed the assets of its radio stations WQHT(FM) and WBLS(FM), in exchange for $91.5 million in cash, a $5.0 million note and 23.72% of the common stock of MediaCo, (ii) Standard General purchased 76.28% of the common stock of MediaCo, and (iii) the common stock of MediaCo received by Emmis was distributed pro rata in a taxable dividend to Emmis’ shareholders on January 17, 2020. The common stock of MediaCo acquired by Standard General is entitled to ten votes per share and the common stock acquired by Emmis and distributed to Emmis’ shareholders is entitled to one vote per share.
The sale closed on November 25, 2019, at which time MediaCo and Emmis also entered into a management agreement (the “Management Agreement”), an employee leasing agreement (the “Employee Leasing Agreement”) and certain other ancillary agreements. The Management Agreement with Emmis Operating Company was for an initial term of two years (cancellable by MediaCo after 18 months) under which Emmis provided various services to us, including accounting, human resources, information technology, legal, public reporting and tax. The Management Agreement was terminated in November 2021 at the expiration of the initial term. We paid Emmis an annual fee of $1.3 million in equal monthly installments for these services, plus reimbursement of certain expenses directly related to our operations. For the years ended December 31, 2021, MediaCo recorded $1.1 million of management fee expense which is included in corporate expenses in the accompanying consolidated statements of operations. The Employee Leasing Agreement was terminated in January 2021 at the expiration of the initial term.
Convertible Promissory Notes
As a result of the transaction described above, on November 25, 2019, we issued convertible promissory notes to both Emmis (the Emmis Convertible Promissory Note) and SG Broadcasting (the “November 2019 SG Broadcasting Promissory Note”) in the amounts of $5.0 million and $6.3 million, respectively. On February 28, 2020, the Company and SG Broadcasting amended and restated the November 2019 SG Broadcasting Promissory Note such that the maximum aggregate principal amount issuable under the note was increased from $6.3 million to $10.3 million. Also on February 28, 2020, SG Broadcasting loaned an additional $2.0 million to the Company pursuant to the amended note for working capital purposes.
On March 27, 2020, the Company and SG Broadcasting further amended and restated the November 2019 SG Broadcasting Promissory Note (as so amended and restated, the “Second Amended and Restated SG Broadcasting Promissory Note”) such that the maximum aggregate principal amount issuable under the note was increased from $10.3 million to $20.0 million. On March 27, 2020, SG Broadcasting loaned an additional $3.0 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes.
On August 28, 2020, SG Broadcasting loaned an additional $8.7 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes, bringing the total principal amount outstanding to $20.0 million.
On September 30, 2020, SG Broadcasting loaned an additional $0.3 million to the Company pursuant to an additional promissory note (the “Additional SG Broadcasting Promissory Note” and, together with the Second Amended and Restated SG Broadcasting Promissory Note, the “2019/2020 SG Broadcasting Promissory Notes”) for working capital purposes.
On November 25, 2020, annual interest of $0.5 million and $1.1 million was paid in kind and added to the principal balances of the Emmis Convertible Promissory Note and the 2019/2020 SG Broadcasting Promissory Notes, respectively.
On May 19, 2021, the Company issued to SG Broadcasting the May 2021 SG Broadcasting Promissory Note, in return for which SG Broadcasting loaned $3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No. 4. Up to $7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note.
On June 1, 2021, SG Broadcasting loaned $1.0 million to the Company under the May 2021 SG Broadcasting Promissory Note as required by Amendment No. 4 to the Senior Credit Facility.
On September 30, 2021, annual interest of $25 thousand on the 2019/2020 SG Broadcasting Promissory Notes was paid in kind and added to the principal balance outstanding.
On November 25, 2021, annual interest of $0.6 million and $2.2 million was paid in kind and added to the principal balances of the Emmis Convertible Promissory Note and the SG Broadcasting Promissory Notes, respectively.
On May 19, 2022, annual interest of $0.4 million was paid in kind and added to the principal balance of the SG Broadcasting Promissory Notes.
On July 28, 2022, SG Broadcasting exercised its right under the SG Broadcasting Promissory Notes to fully convert the outstanding principal and accrued but unpaid interest into the Company's Class A common stock, and the 2019/2020 SG Broadcasting Promissory Notes were terminated at that time, while the May 2021 SG Broadcasting Promissory Note remains outstanding, but with no amounts outstanding as of December 31, 2022. See Note 7 and Note 11.
On August 19, 2022, Emmis exercised its right under the Emmis Convertible Promissory Note to convert $30 thousand of the outstanding principal for 11 thousand shares of the Company's Class A common stock.
On November 25, 2022, annual interest of $0.8 million was paid in kind and added to the principal balance of the Emmis Convertible Promissory Note.
On December 21, 2022, Emmis exercised its right under the Emmis Convertible Promissory Note to convert $0.9 million of the outstanding principal and $0.1 million of accrued but unpaid interest for 0.8 million shares of the Company's Class A common stock.
Consequently, the principal amount outstanding as of December 31, 2022 under the Emmis Convertible Promissory Note was $6.0 million.
The Company recognized interest expense of $0.8 million and $0.6 million related to the Emmis Convertible Promissory Note for the years ended December 31, 2022, and 2021, respectively. The Company recognized interest expense of $1.8 million and $2.5 million related to the SG Broadcasting Promissory Notes for the years ended December 31, 2022, and 2021, respectively.
The terms of these notes are described in Note 7.
Convertible Preferred Stock
On December 13, 2019, in connection with the purchase of Fairway, the Company issued to SG Broadcasting 220,000 shares of MediaCo Series A Convertible Preferred Stock.
Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $3.3 million and $2.8 million for the years ended December 31, 2022, and 2021. On December 13, 2022, and 2021, $3.4 million and $2.7 million, respectively, of dividends were paid in kind. These payments in kind increased the accrued value of the preferred stock and 80,000 additional shares were issued as part of this payment. As of December 31, 2022, and 2021, unpaid cumulative dividends were $0.1 million and $0.2 million, respectively, and included in the balance of preferred stock in the accompanying consolidated balance sheets. See Note 4 for a description of the Preferred Stock.
On December 28, 2022, SG Broadcasting exercised its right to partially convert $4.0 million of the outstanding balance on the MediaCo Series A Preferred Shares, for 3.3 million shares of the Company's Class A common stock.
Loan Proceeds Participation Agreement
On April 22, 2020, MediaCo and Emmis entered into a certain Loan Proceeds Participation Agreement (the “LPPA”) pursuant to which (i) Emmis agreed to use certain of the proceeds of the loan Emmis received pursuant to the Paycheck Protection Program (“PPP”) under Division A, Title I of the CARES Act to pay certain wages of employees leased to MediaCo pursuant to the Employee Leasing Agreement, between Emmis and MediaCo (ii) Emmis agreed to waive up to $1.5 million in reimbursement obligations of MediaCo to Emmis under the Employee Leasing Agreement to the extent that the PPP Loan is forgiven, and (iii) MediaCo agreed to promptly pay Emmis an amount equal to 31.56% of the amount of the PPP Loan, if any, that Emmis is required to repay, up to the amount of the reimbursement obligations forgiven under (ii) above. Standard General L.P., on behalf of all of the funds for which it serves as an investment advisor, agreed to guaranty MediaCo’s obligations under the LPPA. During 2021, Emmis received notification that the full amount of the loan was forgiven.
Management Agreement for Billboards LLC
On August 11, 2020, the board of directors of the Company unanimously authorized the entry into a certain Management Agreement (the “Billboard Agreement”) between Fairway Outdoor LLC (a subsidiary of the Company, “Fairway”) and Billboards LLC (an affiliate of Standard General, “Billboards”). Under the Billboard Agreement, Fairway will manage the billboard business of Billboards in exchange for payments of $25,000 per quarter and reimbursement of all out-of-pocket expenses incurred by Fairway in the performance of its duties under the Billboard Agreement. The Billboard Agreement has an effective date of August 1, 2020, has a term of three years, and has customary provisions on limitation of liability and indemnification. $0.1 million of income was recognized in the year ended December 31, 2022 in relation to the Billboard Agreement, none of which was outstanding as of December 31, 2022. Additionally, Fairway incurred $0.2 million of out-of-pocket expenses for the period, substantially all of which has been reimbursed as of December 31, 2022. On December 9, 2022, in connection with the sale of the assets held by Fairway, the Billboard Agreement was terminated pursuant to mutual agreement between Fairway and Billboards.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
14. SUBSEQUENT EVENTSFees Paid to Independent Registered Public Accountants
MediaCo is in ongoing negotiations with
The following table sets forth the SAG-AFTRA unionfees (including cost reimbursements) paid to Ernst & Young LLP (Indianpolis, IN, PCAOB ID 42) for the WBLS (FM) station. Currently, a term sheet has been agreed upon and we expect a definitive agreement to be signed in the second quarter.
In March 2023, a one-time bonus award of $0.4 million was approved and granted to select employees. These awards are to be paid partially in cash and partially in restricted stock awards, which vest immediately upon grant in March 2023.
There were no other subsequent events other than those discussed in Note 3, Note 4 and Note 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this transition report, the Company evaluated the effectiveness of the design and operation of its “disclosure controls and procedures” (“Disclosure Controls”). This evaluation (the “Controls Evaluation”) was performed under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).
Based upon the Controls Evaluation, our CEO and CFO concluded that as of December 31, 2022, our Disclosure Controls are effective to ensure that information relating to MediaCo Holding Inc. and Subsidiaries that is required to be disclosed by us in the reports that we file or submit is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the quarteryear ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect,and December 31, 2023, for various categories of professional services they performed as our internal control over financial reporting.independent registered public accountants.
Limitations on Effectiveness of Controls
| | | Year ended December 31, 2021 | | | Year ended December 31, 2022 | | | Year ended December 31, 2023 | |
| | | | | | | | | | |
| Audit Fees | | $ | 470,000 | | | $ | 382,500 | | | $ | 392,750 | |
| Other Audit Fees | | | 125,000 | | | | 103,500 | | | | 118,000 | |
| Total Fees | | $ | 595,000 | | | $ | 486,000 | | | $ | 510,750 | |
(1)Includes audit related fees incurred and Procedures and Internal Control over Financial Reportingexpensed.
(2)In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management’s Report on Internal Control Over Financial Reporting
The management of MediaCo Holding Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant2023, other audit fees incurred related to the rulesannual comfort letter relating to our at-the-market offering, the divestiture of our outdoor advertising business, and regulationsdiscontinued operations. In 2022, other audit fees incurred were related to the annual comfort letter relating to our at-the-market offering, a going concern assessment and fees associated with close monitoring designation.
Engagement of the SecuritiesIndependent Registered Public Accountants and Exchange Commission, internal control over financial reporting is a process designedApproval of Services
During the year ended December 31, 2023, prior to engaging the independent registered public accountants to render the above services and pursuant to its charter, the Audit Committee approved the engagement for each of the services and determined that the provision of such services by or under the supervision of, MediaCo Holding Inc.’s principal executive and principal financial officers and effected by MediaCo Holding Inc.’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordanceindependent registered public accountants was compatible with generally accepted accounting principles and includes those policies and procedures that:
(1)Pertain to the maintenance of records thatErnst & Young LLP’s independence in reasonable detail accurately and fairly reflect the transactions and dispositionsconduct of its auditing services. Under its current charter, it is the policy of the assetsAudit Committee (or in certain instances, the chairman of the Company;
(2)Provide reasonable assurance that transactions are recorded as necessaryAudit Committee) to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of MediaCo Holding Inc. are being made only in accordance with authorizations of management and directorspre-approve the retention of the Company;independent registered public accountants for any audit services and
(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of MediaCo Holding Inc.’s assets that could have a material effect on the financial statements.
Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2022, based on the control criteria established in a report entitled Internal Control—Integrated Framework (2013 Framework), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, management has concluded that its internal control over financial reporting is effective as of December 31, 2022.
ITEM 9B. OTHER INFORMATION
On March 30, 2023, as a one-time bonus, the Compensation Committee of our Board of Directors made awards under our 2021 Equity Compensation Plan of vested shares of our Class A common stock to Ann C. Beemish, our Executive Vice President, Chief Financial Officer and Treasurer (129,888 shares) and Bradford A. Tobin, our President, Chief Operating Officer, and General Counsel (86,125 shares). The Compensation Committee also awarded Ms. Beemish a cash bonus of $150,000.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item with respect to directors or nominees to be directors of MediaCo is incorporated by reference from the sections entitled “Proposal 1: Election of Directors,” “Delinquent Section 16(a) Reports,” “Corporate Governance – Certain Committees of the Board of Directors,” and “Corporate Governance – Code of Ethics” in the proxy statement for the Annual Meeting of Shareholders expected to be filed within 120 days after the end ofany non-audit services, including tax services. No services were performed during the fiscal year to which this report applies. Information about executive officers of MediaCo or its affiliates who are not directors or nominees to be directors is presented in Part Iended December 31, 2023, under the caption “Information about our Executive Officers.”de minimis exception in Rule 2-01(c) (7)(i)(C) of Regulation S-X.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the sections entitled “Corporate Governance – Compensation of Directors,” and “Executive Compensation” in the proxy statement for the Annual Meeting of Shareholders expected to be filed within 120 days after the end of the fiscal year to which this report applies.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference from the section entitled “Security Ownership of Beneficial Owners and Management” in the proxy statement for the Annual Meeting of Shareholders expected to be filed within 120 days after the end of the fiscal year to which this report applies.
Equity Compensation Plan Information
The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under our 2021 and 2020 Equity Compensation Plans as of December 31, 2022. Our shareholders have approved these plans.
| | | | | | | | | | | | | | | | | |
| Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) |
| Plan Category | (A) | | (B) | | (C) |
| Class A common stock | | | | | |
| Equity Compensation Plans | | | | | |
| Approved by Security Holders | 855,782 | | | $ | 3.10 | | | 1,137,750 | |
| Equity Compensation Plans | | | | | |
| Not Approved by Security Holders | — | | | — | | | — | |
| Total | 855,782 | | | $ | 3.10 | | | 1,137,750 | |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference from the sections entitled “Corporate Governance – Independent Directors” and “Corporate Governance – Transactions with Related Persons” in the proxy statement for the Annual Meeting of Shareholders expected to be filed within 120 days after the end of the fiscal year to which this report applies.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our independent registered public accounting firm is Ernst & Young LLP, Indianapolis, IN, PCAOB ID 42.
The information required by this item is incorporated by reference from the section entitled “Matters Relating to Independent Registered Public Accountants” in the proxy statement for the Annual Meeting of Shareholders expected to be filed within 120 days after the end of the fiscal year to which this report applies.
The financial statements filed as a part of this report are set forth under Item 8.
No financial statement schedules are required to be filed with this report.